THATO MOROEROE

BUSINESS AND MANAGEMENT

26/03/2020
MARKETING: PRICING

PAUL HOANG; CASE STUDY

QUESTION 4.8.5 PRICE DISCRIMINATION

a) Define the term price discrimination?
Price discrimination is a selling strategy that charges
customers different prices for the same product or service
based on what the seller thinks they can get the customer
to agree to. In the case study, theme parks charge prices
on children of age 3-11 and adults of age 12 and older on
1 day pass, annual pass (mon - fri entry) and annual pass
(mon – sun entry).
b) With reference to the above data,
examine how theme parks use price
discrimination to increase their revenue.
To increase their revenue, the theme parks is actually
setting high prices during the peaks as shown in the table
that prices are charged into segments; we have children ,
adults and also families but for children under 3 – years
and local senior residents aged 65 and above, they have
free entry. Themes parks is usually setting this prices
during holidays where most spent their time home and
visiting the places of interest.
The Theme parks charge high prices for adults due to
different passes. For 1 day pass price is lower that annual
passes.
Also, to increase their revenue, themes parks divided
passes into daily and annually. We have 1 day pass for
individuals charged $78 for children and $ 88 for adults.
For families with 2 adults and 2 children, the price is $ 305
and for families with 1 adult and 2 children is $ 230.
Annual pass has prices for both children and adults with
different entries, Monday to Friday and Monday to Sunday
entry. For Monday to Friday entry the price for children is
$275 and for adults is $308 which makes the difference of
$33 and for Monday to Sunday entry, the price for children
is $390 and for adults is $440 which also makes the
difference of $50.
In conclusion, to increase their revenue, themes parks
used the three conditions of price discrimination which
shows that the business must have degree of market
power to set prices, customers must have different
degrees of willingness to pay, otherwise the business
cannot set different prices to different segments of the
market and also the markets must be kept separate to
prevent resale.