A Price Discrimination and a Single-Pricing Strategy Essay

A Price Discrimination and a Single-Pricing Strategy - Essay Example Instead of charging a uniform price to everyone, the cable TV company can think in terms of charging the customers with respect to the number of paid channels they would like to watch. For some customers may not like sports channels and some others may not like movie channels. The cable TV company can think in terms of allowing the customers to select the channels they would like to watch and based on that the company can decide the prices of the service. Thus customers will get much more flexibility in selecting channels and controlling their budget for watching television channels. At the same time, it should be noted that the cable TV company may not lose any revenue since more customers will come forward to purchases such services because of the increased flexibility in selecting channels. In a perfectly competitive market, sellers may not get the freedom to fix the price. If they set a price above the market price, nobody will buy their product in a competitive market. In short, they will get only a normal profit in the long run. Some firms may fix higher prices for their products if the competition is less. Such firms will get abnormal profits in the short run. The abnormal profit earned by a single firm in a market will encourage other forms to enter the market and therefore supply will increase and the price would come down. Long run average cost curves represent the economies of scale and diseconomies of scale as far as a firm is concerned. Economies of scale mean the ability of a firm to reduce the unit price of a product with the help of bulk production.