Janie,a farmer,sells a dozen ears of corn to her neighbor for $1/dozen.She sells a dozen ears of corn to the small market down the street for $.75/dozen.She sells corn to the chain grocery store in town for $.50/dozen.Janie is using
A) differential pricing.
B) discriminatory pricing.
C) price skimming.
D) illegal pricing.

Question

Quizplus · Accepted Answer

Janie is using differential pricing by charging different prices to different customers based on their purchasing power and willingness to pay. She charges the highest price to the neighbor who is willing to pay $1/dozen, a lower price to the small market for $.75/dozen, and the lowest price to the chain grocery store for $.50/dozen. This strategy allows Janie to maximize her profits by capturing the most value from each customer group. Discriminatory pricing involves charging different prices to different customers based on their personal characteristics, such as age, gender, race, etc., which is illegal in many cases. Price skimming involves charging a high price for a product when it is first introduced, then gradually lowering the price as competition enters the market. This strategy is usually used for high-end products with a limited target market. Illegal pricing involves setting prices below the cost of production with the intention of driving competitors out of business, which is considered predatory pricing and is illegal in many countries.

Janie,a Farmer,sells a Dozen Ears of Corn to Her Neighbor