Chapter 16: Price Discrimination and Sophisticated Pricing Strategies

This set of flashcards covers key concepts and vocabulary related to price discrimination and pricing strategies as discussed in Chapter 16. Each card presents a term and its corresponding definition, aiding in review and understanding for the upcoming exam.

Price Discrimination

Selling the same product at different prices.

Reservation Price

The maximum price a customer will pay for a product, equal to their marginal benefit.

Perfect Price Discrimination

Charging each customer their reservation price.

Group Pricing

Price discrimination by charging different prices to different groups of people.

The Hurdle Method

A pricing strategy that offers lower prices only to buyers willing to overcome some obstacles.

Economic Surplus

The total benefit gained by buyers and sellers in a market, which can be redistributed under price discrimination.

Marginal Cost

The cost of producing one more unit of a product.

Marginal Revenue

The additional revenue gained from selling one more unit of a product.

Consumer Surplus

The difference between what consumers are willing to pay and what they actually pay.

Producer Surplus

The difference between what producers are willing to accept for a good and the price they actually receive.

Market Power

The ability of a firm to influence the price of a product.

Price Elasticity of Demand

A measure of how much the quantity demanded of a good responds to a change in price.

Quantity Discount

Lower per-unit prices when purchasing a larger quantity.

Bundling

Selling different goods together as a package for a lower price.

Group Segmentation

Dividing a market into smaller segments based on characteristics such as age or income.

Elastic Demand

Demand that is sensitive to price changes; small changes in price result in large changes in quantity demanded.

Inelastic Demand

Demand that is not sensitive to price changes; large changes in price result in small changes in quantity demanded.