A manager in a restaurant serves a 40-year-old adult a house drink special for $5 but charges a 21-year-old adult $9 for the same drink. What pricing tactic is being used by this manager?
Price discrimination is the pricing tactic being used by this manager.
Price discrimination occurs when a seller charges different prices to different customers for the same product or service, based on factors such as age, income, or other characteristics. In this case, the restaurant manager charges a lower price to a 40-year-old adult compared to a 21-year-old adult for the same drink, demonstrating a clear example of price discrimination.
This choice correctly identifies the manager's practice of charging different prices for the same house drink special based on the age of the customers. By offering a lower price to one demographic (the 40-year-old) and a higher price to another (the 21-year-old), the manager is effectively segmenting the market and maximizing revenue from different customer groups.
Price fixing involves an agreement between parties to set prices at a certain level, often eliminating competition. This situation does not involve collusion or an agreement to fix prices; it's an independent pricing strategy employed by the manager based on customer demographics, making this option incorrect.
Bait and switch is a deceptive marketing practice where a seller advertises a low price to attract customers but then persuades them to purchase a more expensive item. In this scenario, the manager is not using deceptive tactics or switching the product offered; instead, they are straightforwardly charging different prices, so this choice does not apply.
Predatory pricing refers to the strategy of setting prices extremely low in order to eliminate competition and gain market share. The charges of $5 and $9 do not reflect an attempt to undercut competitors but rather a differentiation in pricing based on customer characteristics. Thus, this choice is not relevant to the pricing tactic used here.
The manager's approach exemplifies price discrimination, where different prices are set for the same product based on customer age. This tactic allows the restaurant to maximize profits by appealing to the price sensitivity of different age groups. Other options like price fixing, bait and switch, and predatory pricing do not accurately describe the manager's actions in this pricing scenario.
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