Automobile manufacturers often use incentive programs, including speci

Automobile manufacturers often use incentive programs, including special financing rates and cash rebates, to increase sales. However, a customer is usually restricted to choosing either the low financing rate or the rebate, but not both.

Is this an example of price discrimination? If so, what type? Explain your reasoning.

ANSWER

Yes, this is a form of price discrimination, specifically, group pricing. In this case, customers are divided into two groups reflecting their preference for a lower initial price or the ability to pay off the purchase over an extended period of time without incurring significant interest charges.