chapter  4
28 Pages

Chapter.4. Pricing.information:.The.interaction.of.mechanism.and. policy

First-degree price discrimination is where the producer sells the same goods to different market segments at different prices. The determinant is the ability or willingness of the customer to pay a price (Dedeke, 2002). For example, IGN Belgium sells its topographic data at the scale of 1:10,000 for different prices, depending on the type of area: rural areas cost half the price of urban areas; i.e., in the 2006 price list, from 10 to 40 euro per square kilometer in rural areas (depending upon area size purchased), compared to 20 to 80 euro for urban areas. The selling of cars has classically been a first-degree pricing process. There is an advertised or recommended price from which discounts are given for large fleet purchasers or selectively for individual customers through trade-in discounts and special offers. The opaque nature of new car pricing has historically made it difficult for potential purchasers to effectively discriminate between vendors. Such customer uncertainty has now encouraged some manufacturers to move from variable to fixed pricing. However, this also can generate problems, as when U.S. car manufacturer Ford announced a “clear pricing strategy”; what was meant to say “‘Here’s a justifiable and reasonable price’ can come across in ads as ‘Hey, we won’t rip you off this time!’” (Mahoney, 2006).