Writing Assignment 2

One method of price discrimination for firms is the use of coupons and rebates. Firms are basically allowing consumers to self-identify their respective price elasticities of demand for a product. Describe the last time you used a coupon or a rebate, and another time where you knew a coupon might be available and yet chose to not bother with it. Make sure to explain how the opportunity cost of your time and effort played a part in the choice you made.

Do you think price discrimination through coupons is fair? Should there be laws against this behavior? Why or why not?

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Solution Preview

The use of coupons or rebates is the third degree price discrimination where producer charges different prices to different consumer groups (price-sensitive and price-insensitive consumers, with a higher price charged to the latter). Well, I happen to fall in the price-sensitive consumer group. Being a fashion-holic, I love to shop at shoe outlets for all the latest releases. Late last year, I was surprised to find that the price for a shoe I had pledged to buy a week earlier had fluctuated in price, three times in 7 days.

(341 words)