Price Discrimination and Resale: A Classroom Experiment
AbstractThe authors present a classroom experiment designed to illustrate key concepts of third-degree price discrimination. By participating as buyers and sellers, students actively learn (1) how group pricing differs from uniform pricing, (2) how resale between buyers limits a seller's ability to price discriminate, and (3) how preventing price discrimination might reduce welfare. The exercise challenges sellers to set optimal prices against unknown demand curves by using a concrete story of pharmaceutical pricing to American and Mexican consumers. By working through profit calculations, students arrive at the optimal seller prices in three different settings: uniform pricing, price discrimination to two groups, and price discrimination to two groups who can resell to each other. The experimental design encourages students to converge reliably to the theoretical predictions. Classroom discussion can focus on real-world examples of price discrimination and on regulatory policy questions in industrial organization and international trade.
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Bibliographic InfoArticle provided by Taylor & Francis Journals in its journal The Journal of Economic Education.
Volume (Year): 39 (2008)
Issue (Month): 3 (July)
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Web page: http://www.tandfonline.com/VECE20
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- Gerald Eisenkopf & Pascal Sulser, 2013.
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TWI Research Paper Series
80, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
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- Gerald Eisenkopf & Pascal Sulser, 2013. "A Randomized Controlled Trial of Teaching Methods: Do Classroom Experiments Improve Economic Education in High Schools?," Working Paper Series of the Department of Economics, University of Konstanz 2013-17, Department of Economics, University of Konstanz.
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