Which case best represents a case of price discrimination?
A) An insurance company offers discounts to safe drivers.
B) A major airline sells tickets to senior citizens at lower prices than to other passengers.
C) A professional baseball team pays two players with identical batting averages different salaries.
D) A utility company charges less for electricity used during off-peak hours, when it does not have to operate its less-efficient generating plants.

Question

Quizplus · Accepted Answer

Price discrimination occurs when a firm charges different prices for the same good or service to different customers. In this case, the major airline is offering lower prices to senior citizens based on their age, which is an example of price discrimination. The other options involve different pricing strategies that do not constitute price discrimination. The insurance company is offering discounts based on driving behavior, the baseball team is paying players based on performance, and the utility company is charging less during off-peak hours based on the cost of generating electricity at different times of day. None of these involve offering different prices to different groups of customers based solely on their characteristics.

Which Case Best Represents a Case of Price Discrimination