Policy Analysis 8

Imagine a vending machine that charges a different price for a can of soda
depending on how hot it is outside! Well, that's exactly what Coca-Cola had
in mind when it was considering putting thermostats in their vending
machines. Read the link on Coca-Cola's plan for vending machines. Use a
graph similar to Figure 10.5 (in book) to illustrate and discuss the
economic rationale behind Coca-Cola's pricing scheme. Be sure to apply the
concept of elasticity. Which consumers would be make better off and which
would be made worse off by this pricing scheme? Suppose instead of the
thermostats, Coca-Cola installed a mechanism that would increase the price
of the soda as the number of cans left in the machine decreases. Would this
be a form of price discrimination? Why or why not? Identify some other
examples of price discrimination.