Economics
A price discrimination strategy is one where different customers are charged different amounts. The price charged for my shop's submarine sandwiches will therefore be different for locals than for visitors. There are a number of ways to achieve this. In the context of a sandwich shop, the prices are going to be listed publicly on the menu, so it is impossible to openly discriminate with respect to prices. One technique that can be utilized to lower the average cost for each sub-for locals is to offer a loyalty card. The local would then receive either a discount or a free sub-after making enough purchases. This would deliver a lower price to locals in the long run. Alternately, a loyalty club can allow the locals to receive discounts if they are members of the club. A certain amount of annual sales would be required for club membership, or even a small fee could be implemented to join the club. Under this plan, only locals would have an incentive to join the club. Once in the club, the locals would receive a standard discount on their purchases. Again, this lowers the average price per sub-for locals in a way that visitors to town cannot take advantage of.
If the legislature implements a price ceiling that is below the current equilibrium price, two things will occur. Presumably, this price will be lower than the current price, if the current price is at equilibrium. The lower price will spur an increase in demand. This will reduce the marginal cost to the cable company as it takes advantage of improved economies of scale. However, there is the risk that the decrease in marginal cost will not be matched by a decrease in the price charged. Thus, the cable company will in all likelihood experience a loss as the result of this price ceiling. Faced with both a loss and an increase in their customer base, the cable company would either have to lower its cost of service...
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