Sunday, April 13, 2008

Netflix and Price Discrimination

Third Degree Price Discrimination occurs when consumers are separated into different groups and charged different prices. I have discovered a clever ruse by that applies this concept by targeting Netflix customers (which I am). Now this will only work on your computer ONCE, so follow these instructions carefully.

  1. Open a new web browser, go to where they will offer you 50 free downloads to subscribe. Keep this open.
  2. Open another new web browser, go to This is the web address that I received on a flier with my Netflix DVD arrival. What is different?

With the /netflix11 extension, you will be offered 35 free downloads instead of 50 (i.e. a higher price). Emusic has apparently discovered (or they believe) that customers of netflix are willing to pay a higher price than the general internet music consuming public. We have been segmented, and are believed to have a higher willingness to pay. I should note that if emusic would not have been able to price discriminate and instead offer one single price, then they probably would have charged some middle price between 35 and 50.

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