Abstract
This paper uses indifference curve analysis to derive simple theoretical measures of the compensating and equivalent variation from joining (or canceling) a paid subscription service that provides access to lower prices, such as an Amazon Prime membership. The case provided here may be a useful tool for teaching an otherwise abstract concept in an undergraduate microeconomics course, as it extends the standard textbook approach to examine real-world questions of interest facing a well-known company. It is demonstrated that compensating and equivalent variation can serve as an important guide in the price-setting process under a business model of this type.
Recommended Citation
(2026)
"Using Amazon Prime Membership to Teach Compensating and Equivalent Variation,"
Journal of Economics and Finance Education: Vol. 20:
Iss.
1, Article 1.
Available at:
https://scholarship.rollins.edu/jefe/vol20/iss1/1
