A woman complained to “Dear Abby” that a laundry charged $1.25 each to launder and press her husband’s shirts, but for her shirts—the same description, only smaller—the laundry charged $3.50. When asked why, the owner said, “Women’s blouses cost more.” Abby suggested sending all the shirts in one bundle and enclosing a note saying, “There are no blouses here—these are all shirts.”Is the laundry practicing price discrimination, or is there really a $2.25 difference in cost?Assuming the laundry is engaging in price discrimination, why do men pay the lower price and women the higher?Could the laundry continue to separate markets if people followed Abby’s advice? What about the policing costs associated with separating the markets?

Answered: A woman complained to “Dear Abby” that…

Microeconomics: Private and Public Choice (MindTap Course List)

16th Edition

ISBN:9781305506893

Author:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Publisher:James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson

Chapter10: Price-searcher Markets With Low Entry Barriers

Section: Chapter Questions

Problem 3CQ

See similar textbooks

Related questions

Question

A woman complained to “Dear Abby” that a laundry charged $1.25 each to launder and press her husband’s shirts, but for her shirts—the same description, only smaller—the laundry charged $3.50. When asked why, the owner said, “Women’s blouses cost more.” Abby suggested sending all the shirts in one bundle and enclosing a note saying, “There are no blouses here—these are all shirts.”

Is the laundry practicing price discrimination, or is there really a $2.25 difference in cost?
Assuming the laundry is engaging in price discrimination, why do men pay the lower price and women the higher?
Could the laundry continue to separate markets if people followed Abby’s advice? What about the policing costs associated with separating the markets?

Expert Solution

Step 1: Define price discrimination

Price discrimination refers to the situation where seller is selling the same product or services in two different markets on different prices.

This is strategies in imperfect market to get more profit.

Trending now

This is a popular solution!

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions