Econominics

Principles of Economics

professor

Dr Lloyd Amaghionyeodiwe

by

Carol Presnell

May 2 2011

You own a local sub shop in a college town. You primarily serve two groups of people: local

residents (both students and other local residents) and visitors to your town. Devise a price

discrimination strategy that will increase your revenues compared to a single-pricing strategy.

My pricing strategy   would be a program called "Home Town Savings". This a program I would use to

increase my sales by using the advantage of repeat   local customers. I would offer a discount card to

local residents who present their ID showing their address. This card would   give them a 10% discount

on their total sale. The card would also have a place for a store stamp, after collecting 30 stamps they

would receive a free sub. By using this type of strategy of having a different price for locals   I would

get more local customers   to come back more often. My out of town customers would pay the regular

menu price .This would give me a dual price strategy that could increase my sales without over

charging any of my customers. This type of promotion also works well in that customers from out of

town would not feel like they were discriminated against in that it is only beneficial if you live near by

Suppose the cable TV industry is currently unregulated. However, due to complaints from

consumers that the price of cable TV is too high, the legislature is considering placing a price

ceiling on cable TV below the current equilibrium price. If the government does make this price

ceiling law, diagram and explain the effects with supply and demand analysis. If the cable TV

company is worried about disgruntling customers, suppose that the company may introduce a

different type of programming that is cheaper for the company to provide yet is equally appealing to

customers. Explain what would be the effects of this action. ... [continues]

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