Managerial Economics 12th Edition by Christopher Thomas,Charles Maurice

Exercise 1

STIHL, Inc., manufactures gasoline-powered chain saws for professional, commercial, farm, and consumer markets. To "better serve" their customers, STIHL offers its chain saws in four different quality lines and associated price ranges: occasional use, midrange, professional, and arborist. Under what circumstances could offering multiple qualities of a product be price discrimination? What form of price discrimination might this represent-first-, second-, or third-degree price discrimination? Explain why this practice could increase profit at STIHL.