Question

Your family business uses a secret recipe to produce salsa and distributes it through both smaller specialty stores and chain supermarkets. The chain supermarkets have been demanding sizable discounts, but you do not want to drop your prices to the specialty stores. True or False: In order to offer a lower price while defending yourself against antitrust lawsuits, you could simply offer a lower price to the chain stores but not the smaller stores. True False

Answer 1

Answer: False

Explanation:

Price discrimination refers to offering the same goods or services to people at a different price and it is illegal. By offering discounts to larger stores and not smaller stores, you would be practising price discrimination.

There are ways you could offer less prices to smaller stores such as through Volume discounts. This means that the more the stores purchase, the more discount they get. The larger stores buy more of the salsa and so for every additional batch purchased you could discount an extra 1%.

With the smaller stores unable to buy such large quantities they would not qualify for discounts.