Economics Case Study on Price Discrimination and Elasticity

Introduction

Price discrimination is a common practice in the market. It usually targets members of the society who are either vulnerable or have special talents that need to harnessed. Price discrimination is commonly implemented in the form of travel discounts for the senior citizens, lower food prices for persons with coupons, and college scholarships for best academic performers, athletes, musicians and other talented youngsters. The justification for each of the price discrimination and whether it makes economic sense are expounded below.

Senior Citizen Discounts for Travel

            Discounts for travel are provided for senior citizens that are 60 years and older. These discounts are made as an appreciation for the work they have done throughout their lives in contributing to the economy, businesses and their families. Discounts for seniors were first implemented in the 1930s in wake of the great depression in the US (Brenoff, 2019). The consideration was made because they were disproportionally poor compared to the younger generations then (Brenoff, 2019). The poverty made them a vulnerable group who could not be dependent on their children. The discounts are not limited to travel and include other services such as hospitality and consumables.

In the present, most senior citizens are better off than the younger generations. However, they are still offered travel discounts. The justification for these discounts is they are retired and therefore more likely to travel for leisure. They also happen to have many destinations in their bucket lists that airlines and other travel companies would like to capitalize on (Brenoff, 2019). The senior travel discounts encourage the senior citizens to make frequent trips resulting on overall profits for the travel companies. The discounts entice the senior citizens having relatively more free time to travel more and sustain the airlines and other related businesses.

Food Sold Cheaper to Customers Having Coupons

            Companies that produce food products often allocate huge sums of money to coupons to attract new customers and encourage loyalty. The most common coupons are those given to families that have low incomes to make food stuffs affordable to them. The association of food coupons with poverty has created a stigma that causes many individuals to neglect them. Surprisingly, the people that need food coupons the most are the ones that fail to use them. they refuse so as not be seen as poor by others (Guan, Atlas & Vadiveloo, 2018). Food coupons are a good way of making savings on the purchase of groceries on the part of the customer. The coupons, however, are not allocated with altruist intentions by the food companies. They are a branding strategy, as they force the customer to pay more attention to the food products and encourage loyalty for the customer to make significant savings.

Coupons have an average face value of less than $2, meaning that they have to be used regularly over an extended period to make significant savings (Guan, Atlas & Vadiveloo, 2018). The overall effect is an increase in the demand for the food brands that allocate coupons for their customers. Higher demand leads to more sales and eventually improves the bottom-line for the food companies. In a nutshell the purposes of the food coupons include to increase sales, improve the number of new customers, increase market visibility of the food brand, reward loyal customers, entice former customers back, and a measure of the effectiveness of marketing.

College Scholarships for Talented Individuals

            Colleges scholarships are offered to students with stellar grades, special athletic abilities, music aptitude and other unusual skills. These scholarships contribute immensely in reducing the student debt of the beneficiary and the burden of the parents in paying college fees. The colleges offer these scholarships with the intention of nurturing the talents of the beneficiary (Edelman, 2017). The talented students also bring fame and recognition to the college as they compete in sports, music, art, and scientific innovations. The recognition gained by the colleges is similar to branding. Colleges associated with talented individuals tend to raise their stature in the eyes of the society and attract more quality students in the future. The scholarships lead to the college having higher demand and better revenues in the long run. College scholarships are mutually beneficial for both the student and the institution. If the talented student does not get the scholarship, there is a possibility of the talent fading as a result of not being nurtured in the right environment. On the part of the college, the institution would not get the desired recognition in the absence of the talented students.

Conclusion

            The travel discounts given to seniors consider the fact that they have more free time to travel, as most of them are retired. The travel discounts encourage more trips, resulting to increased revenues for the travel and hospitality companies. Food stamps are used to entice the customers into loyalty to the food brands. This increases the demand for the products as the customer seeks to make more savings. The increased demand for the food brands improves their revenue streams. College scholarships offer mutual benefits for the student and the institution. The student ends up avoiding crippling student debt while the institution gains recognition. All in all, the discussed price discrimination methods increase the demand for the products and services and the overall revenues for the involved companies. The price discrimination makes economic sense.

 

 

References

Brenoff, A. (2019). Senior Discounts Aren’t Necessary And Actually Can Do Harm: The accomplishment of retaining a pulse should not be grounds alone for discounts. Retrieved from https://www.huffpost.com/entry/senior-discounts-arent-necessary-and-actually-can-do-harm_n_56f97555e4b0a372181a8113

Edelman, M. (2017). From Student-Athletes To Employee-Athletes: Why A “Pay For Play” Model Of College Sports Would Not Necessarily Make Educational Scholarships Taxable. Boston College.Law School.Boston College Law Review, 58(4), 1138-1168.

Guan, X., Atlas, S. A., & Vadiveloo, M. (2018). Targeted retail coupons influence category-level food purchases over 2-years. International Journal of Behavioral Nutrition and Physical Activity, 15 doi:http://dx.doi.org/10.1186/s12966-018-0744-7