Increasingly, online retailers are taking advantage of user location data in order to charge different prices to different classes of consumers. Booking site HotelTonight, for example, shows different discounted hotel rates to users based on their zip codes. Some people view this as a sleazy business practice, yet some economists will say that this is not only a normal business practice - it might be good for consumers in the long run. Using the tools of economics, how might you defend this pricing strategy? What conditions would need to hold in order to make this sort of pricediscrimination successful?

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Answer Defending the pricing strategy of online retailers using user location data to implement price discrimination involves understanding the economic rationale behind it and considering its potenti... View the full answer