Exam 3 Cheat Sheet - PriceDiscrimination(PD: ^Principles:1)differentDcurves=segmentmarkets.|2)MaxProfit .|3)Arbitragereduces profitofPD

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

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