Pedagogy in Action > Library > Context-Rich Problems > Examples > Price discrimination context-rich problem

Price discrimination context-rich problem

Joann Bangs, St. Catherine University
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This material was originally created for Starting Point: Teaching Economics
and is replicated here as part of the SERC Pedagogic Service.

Summary

Students prepare an essay to explain pricing strategies for two different companies. One of the firms will find price discrimination difficult as the product can be easily resold.

Learning Goals

Students will be able to apply economic theory on price discrimination to real world settings.

Context for Use

This activity can be assigned for any size class. It is designed to have as essay prepared outside of class, but could easily be modified to have the work done entirely in class. If students have some practice with doing context-rich problems, this problem is possible for a single student to complete. If your students are new to context-rich problems, having them discuss the problem in groups before they write the essay is helpful. The discussion can be completed in about 10 minutes.

Description and Teaching Materials

You have been hired to be a consultant on pricing strategies for two different companies. Both of the companies have similar customer bases in that their customers fall into two well defined groups: college students and young well paid professionals. The first company is a trendy bar. The bar is currently seeing many young well paid professionals as customers, but quite a bit fewer college students. The bar has run a marketing campaign to attract more college students, but that only caused a small increase in the number of those customers. The second company is an electronics store selling items such as ipods. This company is also currently seeing many young well paid professionals as customers, but quite a bit fewer college students. The electronics store has also run a marketing campaign to attract more college students, but that also only caused a small increase in the number of those customers. Both of these companies want to know if they could make some changes in their pricing strategy to increase their sales to college students and thereby increase their overall profits. Prepare a report for each company. Each report should be one-half page in length. In each report, make a recommendation to the company detailing what they must do to follow your recommendation and explain why they should follow your recommendation.


price discrimination context-rich problem (Rich Text File 38kB May28 09)



Teaching Notes and Tips

Students will need to be familiar with the concepts of elasticity and price discrimination before you assign the problem.

Assessment

The problem asks students to prepare 2 reports for each of the companies. These reports can be used to assess the students understanding of price discrimination concepts.

References and Resources

See more Examples »


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