A hotel with market power charges customers who check in before 5:00 p

A hotel with market power charges customers who check in before 5:00 pm more than those who check in after 5:00 pm. Those who check in early are much more likely to use the hotel’s pool. Explain why this price difference may not be price discrimination.

What will be an ideal response?

ANSWER

The marginal cost of providing a hotel stay to those who check in early may be greater than the marginal cost of providing a stay to those who check in after 5:00 pm. Those who check in early are more likely to use more towels, soap, shampoo, bathing caps, etc., than those who arrive after 5:00 pm. The difference in costs may explain the hotel price differences.