This week we cover decision making related to pricing strategy

Subject:EconomicsPrice:4.86 Bought8

Share With

This week we cover decision making related to pricing strategy. We often think of "Price" in terms of our most common experience - prices we pay for goods and services. However, prices can be quoted in non-traditional terms, as well. 

• Insurance market: Price of insurance is the insurance premium
• Credit Market: Price of credit is the interest rate (effective annual rate)
• Money Market: Price of holding cash is the inflation rate
• Barter Arrangement: Price of a barter arrangement is stated in terms of commodities involved in the barter.

For each situation described below, discuss the nature of the price discrimination (whether it is direct or indirect price discrimination), and substantiate your conclusions. 

1. Higher interest rates on car loans for borrowers with lower credit scores
2. Charging ethnic minorities (or red lining) higher rates on mortgages and mortgage refinance
3. Kohl's retailer offering discounts for early morning shoppers
4. Charging higher rates on business loans
5. Volume discounts and/or benefits (example free shipping)
6. Charging higher rates on mortgage related financing for borrowers in a certain zip code.

Additional business illustrations of price discrimination drawn from your experience are most welcome.

Also, is price discrimination generally illegal? In the above list which ones are illegal?

Is price discrimination an ethical strategy?