Insurance companies charge men a higher price for automobile insurance than women. The costs of insuring men are higher because they get into more accidents than do women. Which of the following statements is TRUE?
A) The insurance companies are practicing price discrimination.
B) The insurance companies are not practicing price discrimination.
C) The insurance companies are practicing inter-temporal price discrimination.
D) The insurance companies are using a bundling/tying strategy.

Question

Quizplus · Accepted Answer

The insurance companies are not practicing price discrimination. They are charging higher prices to men based on the fact that they are a higher risk group for accidents, which is based on observable characteristics. This is known as risk-based pricing and is not considered price discrimination.

Insurance Companies Charge Men a Higher Price for Automobile Insurance