Practice question · Multiple choice
A software firm charges 9€ a month for individuals and 90€ per seat for enterprises, shipping identical code. What makes that sustainable rather than a scandal?
Hints
- What stops the expensive segment from simply buying at the cheap price?
- Price discrimination has a precondition. Name it.
Show the answer
A. The segments cannot arbitrage between the two prices
Why
Discrimination survives only where resale is blocked, which is why the terms of service do the economic work the code does not. Cinemas check student cards for the same reason, and airlines invent Saturday-night stays, each is a fence keeping one segment out of the other's price.
Practise Pricing Strategies
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More questions on Pricing Strategies
- Penetration pricing aims to maximize profit on each unit sold from day one.
- A product costs 60€ to make and sells with a 25% markup on cost. Set the slider to its price in €.
- Sort each real-world price into its strategy.
- Match each pricing method to the condition where it shines.
- Why can a cinema profitably charge students less than adults for the same seat?
- Which are genuine weaknesses of pure cost-plus pricing?
- Versioning sells a cut-down product alongside a full one, sometimes by disabling features already built. Why…