When Apple released the initial iPhone, thousands of people waited for hours in line and were willing to pay $600 for the 8 GB model. About two months after it was released, Apple reduced the price of the iPhone by $200. A customer who paid the higher price for the iPhone sued Apple for $1 million, claiming that Apple engaged in illegal price discrimination.

a. Why did Apple charge a higher price to customers who purchased the iPhone within the first few months of its release?

b. Were Apple's actions illegal? Explain.

c. Eventually Apple voluntarily offered a $200 rebate to all customers who purchased the iPhone before it was discounted. Why would they offer this rebate to all customers without being required to?

d. Does Apple continue to engage in price discrimination? If so, how? In 2007, Apple released the initial iPhone.