The advanced pricing technique that would be most appropriate for a Sam’s Club or Costco would be second degree price discrimination. Second degree price discrimination is defined by Thomas and Maurice (2010, p. 583) as, “When a firm offers lower prices for larger quantities and lets buyers self-select the price they pay by choosing how much to buy.” Therefore, when the same consumer buys more than one unit of a good or service at a time the marginal value placed on consuming additional units declines as more units are consumed (Thomas & Maurice 2010). In addition, second degree price discrimination reduces the average price as the amount purchased increases.
Likewise, this pricing technique tends to work best for products and services for which consumers will buy multiple units during a given period. Furthermore, second degree price discrimination knows only that people who buy small amounts will have high marginal valuations and people who buy large amounts will have low marginal valuation. So overall, those that buy small amounts will be less price sensitive than those that buy large amounts. Sam’s Club and Costco offers the ability to purchase in bulk which is essentially a good representation of second degree price discrimination. Additionally, customers who buy in bulk receive special offers and discounts that are not permitted to those that purchase single items. in which customers pick among the pricing options offered by the firm. As in the case with Sam’s Club there are packages in which allows buyers to choose the type of membership package they would like. Furthermore, larger quantities of a good pay a lower per unit price.
Likewise, this pricing technique tends to work best for products and services for which consumers will buy multiple units during a given period. Furthermore, second degree price discrimination knows only that people who buy small amounts will have high marginal valuations and people who buy large amounts will have low marginal valuation. So overall, those that buy small amounts will be less price sensitive than those that buy large amounts. Sam’s Club and Costco offers the ability to purchase in bulk which is essentially a good representation of second degree price discrimination. Additionally, customers who buy in bulk receive special offers and discounts that are not permitted to those that purchase single items. in which customers pick among the pricing options offered by the firm. As in the case with Sam’s Club there are packages in which allows buyers to choose the type of membership package they would like. Furthermore, larger quantities of a good pay a lower per unit price.