121 pricing and price discrim 2007

121 pricing and price discrim 2007 - Pricing and Price...

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Pricing and Price Discrimination Econ 121, fall 2007 Professor Joseph Farrell 25 October 2007
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(Review?) Lerner Condition • % change in profits from 1% change in p • % change in A.B generally • Lerner equation • What does “equation” mean here? • Recall other ways of understanding/deriving the condition
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Applying Lerner Condition • What happens when demand shifts? • What happens when cost changes? • “Residual” demand elasticity – Competition typically raises residual elasticity – How this works in Cournot equilibrium – Dominant firm with competitive fringe
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Price Discrimination • (Various types) • Seller can see something about customers that differentiates by demand elasticity • Limits from re-selling? • Optimal pricing to different groups • How profitable is it? • Creating versus capturing value
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• Different willingness to pay for quality • What if can’t observe customer type • High and low quality versions of product • Self-selection “constraints”
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This note was uploaded on 09/29/2008 for the course ECON 121 taught by Professor Woroch during the Fall '07 term at Berkeley.

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121 pricing and price discrim 2007 - Pricing and Price...

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