Price Discrimination. Describe the Price

¶ … price discrimination. Describe the price discrimination. Who does it benefit? Who might it harm?

Price discrimination is often seen when discounts are given to senior citizens and students, such as when these groups are buying tickets for events. Many local businesses (such as gyms, pizza parlors, theaters, or events) also often give students or senior citizens a small discount, if they present an ID. This is supposed to give individuals on limited incomes an additional incentive to shop at a particular store and spend money. It benefits the retailer by encouraging a preference for the establishment over others that do not give the discount, as well as helps the student or senior citizen. The retailer also generates community goodwill by improving town-gown relationships and showing respect for older consumers. However, it might harm other retailers who are not able to give the discount, as well as offend customers who are not in the 'protected category' but still have a limited income and believe that they should also pay a lower fare.

Reference

Price discrimination. (2011). Investopedia. Retrieved March 2011 at http://www.investopedia.com/terms/p/price_discrimination.asp

Student 2:

Price discrimination is often seen in the insurance industry, where certain classes of drivers are charged higher premiums, based upon the calculated risk of the agency for that particular class of driver. Younger, male drivers are statistically more likely to get into accidents than middle-aged female drivers, so they are charged higher insurance premiums. In contrast, since women often spend more on healthcare, women may be charged more for health insurance than males. This discrimination clearly benefits the insurance agency, as it allows the insurance agency to obtain more money from individuals who are apt to 'cost' the company more. Theoretically, it benefits individuals who are in the lower-risk categories, as they do not have to pay as high a premium, given they are statistically less likely to incur higher costs. However, it penalizes individuals such as careful young male drivers or women who under rather than over-consume healthcare services, by forcing them to pay more, simply because of their gender or age.

Reference

Pear, Robert. (2008, October 29). Women buying health insurance pay a premium. Retrieved March 2011 at http://www.nytimes.com/2008/10/30/us/30insure.html?pagewanted=1&_r=1

Q2. According to the National Bureau of Economic Research (NBER) the recession that began in December 2007 ended in June 2009 (http://www.nber.org/cycles/sept2010.html). What evidence have you seen that the economy is improving? Explain. How does your observation relate to economic theory regarding recessions and recovery? (150 words)

More people I know are spending a greater proportion of their income on items that are not strictly necessities. During recessions, when people fear losing their jobs, workers are less apt to spend money on things like clothes and entertainment, and horde their money. If they have lost their job, they try to spend as little money as possible. Americans are also buying more big-ticket items like cars, home appliances, and homes, indicating that they are confident enough to take advantage of the currently low interest rates and feel more certain they can pay back the loans in the future. More businesses are hiring, indicating that consumer demand has increased and there is a greater need for staff to meet the business' needs. The stock market is improving, which also indicates that people are investing their money in a more high-risk fashion than before, and feel more confident about the direction of the economy.

Q3. Do you believe companies should be allowed to place cookies on your electronic devices without notifying you as a condition of doing business with them? Do you believe they should be able to place cookies that automatically re-spawn after a user deletes them? From an economic perspective, is there a benefit in allowing companies to install cookies? Is there harm? Do the benefits outweigh the costs?