Suppose a restaurant is trying to determine how much to charge for a bowl of chilli, and decides to run an experiment to see how much its customers are willing to pay by allowing them to set their own price for this menu item.
a.Is charging a customer the price he or she is willing to pay for the bowl of chilli an example of price discrimination? Briefly explain.
b.What is it called when a firm knows every consumer's willingness to pay, and can charge every consumer a different price? What happens to consumer surplus in this situation?
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The Answer of Suppose a restaurant is trying to determine how much to charge for a bowl of chilli, and decides to run an experiment to see how much its customers are willing to pay by allowing them to set their own price for this menu item.
a.Is charging a customer the price he or she is willing to pay for the bowl of chilli an example of price discrimination? Briefly explain.
b.What is it called when a firm knows every consumer's willingness to pay, and can charge every consumer a different price? What happens to consumer surplus in this situation?
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Suppose a Restaurant Is Trying to Determine How Much to Charge