Exam 3 Cheat Sheet - PriceDiscrimination(PD:...

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Price Discrimination (PD): Selling same product at different prices to different customers to increase profit. ^Principles: 1)different Dcurves = segment markets. | 2) Max Profit by setting higher price in inelastic market. | 3) Arbitrage reduces profit of PD Arbitrage: Smuggling by buying good in low market, selling in high in another. (exploits PD) Preventing Arbitrage: Regional; Color coordination, special bar codes. | Industry; Alter product to diminish value of one use. Segmenting Markets into: Regional, Industries, Demand, Efficiency/Convenience. PD profitible as long as P>MC PD Graph: Demand=Willingness to Pay Perfect Price Discrimination (PPD): 0 consumer surplus, producer gets all gains from trade. NO DWL. Efficient Quantity; PPD Mono produces good until P=MC MR= MC ; aim of all firms P= MC ; aim of competitive firms to produce until.. Wprice= no segmented markets, more affordable for one, expensive the other. Output/consumption falls. Tying= Sells 1 product knowing that ownership will increase Demand of another product. Printer & INK Bundling= If sold seperat, would be MUCH MORE EXPENSIVE.
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