Segmented Demand at an Agnostic Point of Sale

An agnostic point of sale (POS) for a single consumable product is characterized by three distinguishing features- 1) customer affluence drives multiple demand levels, 2) the affluence of any specific customer is unknown to the retailer, and 3) the retailer sets a single price for all customers. The local grocery store where customers of all income levels pay the same price for a food staple is the quintessential example. This paper provides a tractable methodology for determining the product price and sales volume that optimizes operating margin at an agnostic POS. The paper addresses pricing strategies, government income assistance, the effect of tariffs, and the allocation of advertising resources across income groups.