Suppose a cereal manufacturer offers one of its cereal brands in two sizes: a 12 ounce box and a 40 ounce box.The per-ounce price of cereal in the 40 ounce box is much less than the per-ounce price charged for the 12 ounce box,and this price differential is not a function of differences in packaging costs.This is an example of ________.

Question

Quizplus · Accepted Answer

This is an example of second-degree price discrimination, where the price is based on the quantity purchased. The larger box is offered at a lower per-ounce price to incentivize consumers to purchase more. This is different from first-degree price discrimination, which is personalized pricing based on individual willingness to pay, and from third-degree price discrimination, which is based on segmenting the market and charging different prices to different groups. It is also not simple monopoly pricing, as there are two sizes of the product being offered.

Suppose a Cereal Manufacturer Offers One of Its Cereal Brands