Question

Internet service providers such as Comcast are able to price-discriminate easily for many reasons. Which of the following is a reason for them to price-discriminate?

A) Homogeneous products
B) Market power
C) Perfect information
D) Government regulation

Answer 1

Comcast and other ISPs can price discriminate due to their market power, which allows them to set different prices based on demand and service delivery costs, unlike the effects of homogeneous products, perfect information, or government regulation.

Step-by-step explanation:

Internet service providers like Comcast can price discriminate primarily due to Market Power. Market power allows companies to charge different prices based on factors such as consumer demand, cost of service delivery, and competitive pressures. Unlike homogeneous products, where products are identical and therefore foster competitive pricing, or situations with perfect information, where consumers know all prices and can choose the cheapest option, or government regulation, which may limit pricing strategies, market power is crucial in enabling ISPs to engage in price discrimination. Market power can result from product differentiation, brand loyalty, and consumer preferences that allow companies to set prices above competitive levels for particular customer segments or geographic areas.