Chanel perfume is sold in France and in the United States. Assume initially that one euro is worth $ 1.30 and that a 100 ml bottle of perfume sells for $ 80 in the United States. If Chanel does not price discriminate internationally, what is the price that would be paid for this perfume in France? Now suppose that Chanel decides to price discriminate and finds that it would maximize its profit by lowering its price in the United States to $ 70 and raising its price by 25% in France. Explain why. Next, explain what happens if the value of the euro rises by 25% in terms of the dollar.

  • CreatedNovember 13, 2014
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