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Economics

Study Notes

The Hurdle Model of Price Discrimination

Level:
AS, A Level
Board:
AQA, Edexcel, OCR, IB

The hurdle model is associated with economist Professor Robert Frank. The hurdle method separates buyers with low minimum buying prices from buyers with higher so-called reservation prices. 

To take advantage of a lower price, the consumer must be prepared to overcome or jump over some kind of hurdle which acts as an inconvenience.

For example:
  • They might have to delay their purchase until a product is remaindered or sold off at lower prices when a more advanced version is available e.g. second edition paperbacks are significantly cheaper than hard back books, it is cheaper to buy/rent/stream older DVDs a few months after their first release
  • Consumers may have to risk not getting the product at a time and place of their choosing e.g. relying on stand-by tickets for shows and airlines
  • They may get a deeper discount if the product is mildly damaged e.g. dented household appliances - “seconds”
  • Discounts may require customers to collect & redeem coupons

Customers prepared to do this tend to be more price sensitive

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