I'm Thirsty for Price Discrimination!
For most businesses, being able to effectively price discriminate is a dream. A company that can create a mechanism that allows price discrimination can significantly increase seller surplus and revenues. Coca-Cola is considering the use of vending machines that react to temperature changes. When the temperature rises, so does the price of Coca-Cola. When you are hot and thirsty are you willing to pay more for a cool Coca-Cola? Coca-Cola stands to benefit greatly if this strategy can be successfully implemented. According to my understanding this idea was met by a consumer backlash. Wouldn't a consumer who purchases Coke on a day when the temperature is below freezing increase their consumer surplus? Economically this is a very good idea if it can be executed without adverse impacts on demand.
Posted by Jake at 3/07/2006 06:50:00 PM