You own a local sub shop in a college town. You primarily serve two groups of people: local residents (both students and other local residents) and visitors to your town. Devise a price discrimination strategy that will increase your revenues compared to a single-pricing strategy.

What will be an ideal response?

People who live in town know all of the local restaurants well and have kitchens where they could cook their own meals. This means that they will have a relatively more elastic demand for your subs than visitors do. You could engage in price discrimination in a number of ways: by mailing coupons to local residents; by giving out cards so that they can get a meal free if they get enough punches on the card; or by participating in programs through which members of local banks and credit unions get discount cards that are honored in your restaurant. Others may propose student discounts because college students have a higher price elasticity due to university food services and food being a higher percentage of a student's budget compared to people working full time.