Question

Versioning is a form of _____ price discrimination because _____.

A) first-degree; the firm can identify its customers' types of demand curves before they buy, allowing the firm to select the profit-maximizing version of the product
B) second-degree; the firm cannot identify its customers' types of demand curves before they buy, so the firm produces various versions of the product in hopes that customers will self-select the appropriate product
C) perfect; each customer buys a unique version of the product that is priced to eliminate all consumer surplus
D) third-degree; the firm can directly determine which customers should buy which version of the product before the sale is made

Answer 1

The correct answer is letter "B": second-degree; the firm cannot identify its customers' types of demand curves before they buy, so the firm produces various versions of the product in hopes that customers will self-select the appropriate product.

Step-by-step explanation:

Price discrimination occurs when a company charges different customers different prices for the same goods or services. The second-degree price discrimination takes place when different prices are charged for different quantities consumed typically when the goods are bought in bulks. Though, only when the purchase happens companies can identify the type of demand for the products offered. To counteract that, firms set different bulks of goods according to what they "think" can be suitable for consumers.