slides9 - Market power and pricing: applications Steve...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
Market power and pricing: applications Steve Allen ECG 507 Fall 2005
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
1. Bundling Bundling is packaging two or more  products to gain a pricing advantage. Conditions necessary for bundling Heterogeneous customers Price discrimination is not possible Text: demands must be negatively correlated  (we will see about that)
Background image of page 2
2. Example of bundling Reservation price: group A Reservation price: group B Jackets 130 50 Pants 20 100
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
3. Example of mixed bundling Group 1 Group 2 Group 3 Cost Appetizer 5 6 0 3 Dinner 10 8 10 5 Dessert 0 6 5 2
Background image of page 4
4. Bundling Impact in IT sector Much greater payoff because MC very low,  sometimes zero Creates entry barriers
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
5. Bundling Tying Combines the purchase of one product with a  complementary product, usually with a contract. Typically one product useless without the other, but  competing firms produce other product Examples: Xerox copiers, IBM mainframes Economic rationale: price discrimination, protect  brand name
Background image of page 6
6. Oligopoly
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 24

slides9 - Market power and pricing: applications Steve...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online