ABSTRACT
This chapter discusses a method of indirect price discrimination, where the seller offers goods and services of different quality levels to consumers, charging more for the higher quality options. It explores possible to think about setting prices for different qualities in a systematic way. The chapter begins with recognition that people have different willingness to pay for higher quality. Indeed, many individuals will be considered strong consumers in some markets and weak consumers in others. The demand for high-quality seats depends, in part, on what is being offered in the low-quality section. When the marginal gains from lowering the low-quality price even further just equal the marginal losses, found the optimal low-quality price. To this point assumed that the quality differentials that are offered. One econometric study found that theatres were offering a deal that was too good at these half-price booths; it was attracting too much demand, at the margin, from customers pay full-price for advance sales.
