Codys cowboy hat emporium has two stores fort worth

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Cody’s Cowboy Hat Emporium has two stores Fort Worth, TX. One in the Stockyards area that caters to tourists and another a mile further north that caters to ranch hands. Why doesn’t Cody sell to both customer types out of one store? ANSWER: Two stores keep tourists from arbitraging away the price differences in Cody’s discrimination scheme. Since tourists do not have too many opportunities to buy cowboy hats, their demand rather inelastic. Ranch hands often replace their hats and are more aware of the different retailers and so are more elastic demanders. Cody takes advantage of this fact by charging higher prices at the Stockyards. It does not sell to ranch hands out of this store because tourists would try to arbitrage away the price differential.
36. Amusement Park / Cola Tie-in The Six Flags Over Texas amusement part in the middle of the Dallas-Fort Worth Metroplex has a tie-in marketing campaign with Coca-Cola during the summer. In local grocery stores, some Coke cans offer $5 off admission to the park. Why does Six Flags limit these cans so that none are sold further than 20 miles from the park? ANSWER: This is a price discrimination scheme trying to separate locals from tourists. Tourists do not get to go to the park as often as locals and so their demand is less elastic. Locals have many opportunities to visit the park and so their demand for additional visits over the summer is relatively elastic. The discount on the Coke can is an attempt to offer lower prices to the more elastic locals. Six Flags limits the distribution of the specially marked cans to just locals as a way to limit arbitrage. 37. Indirect price discrimination differs from direct price discrimination because a. In indirect price discrimination high value consumers can sometimes still get the low price b. In direct price discrimination firms do not have to worry about cannibalizing c. Direct price discrimination encourages rivals to enter but indirect discrimination does not d. There is no difference between the two 38. When deciding what price to charge customers, a firm may choose to charge different prices based on customers’ a. Age b. Willingness to pay c. Location d. All of the above 39. Which of the following is not an example of price discrimination? a. Senior citizen discount at the movies b. Grocery coupons c. Shipping a package further costs more d. Charging a higher price for ice-cream during the summer and a lower price in the winter

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