Carvel advertises a football-shaped ice cream cake for $7; you can buy a second one for only $4.What does Carvel know about consumer preferences?

Question

Quizplus · Accepted Answer

Carvel is likely aware that the marginal utility of ice cream cakes diminishes as consumers eat more of them. By offering a second cake for a lower price, they are able to entice consumers who may not have initially considered purchasing a second cake due to decreased marginal utility. This pricing strategy is based on the idea of price discrimination, where consumers who are more price-sensitive are more likely to purchase the second cake at a discounted price.

Carvel Advertises a Football-Shaped Ice Cream Cake for $7; You