ECO2201_Slides_7.3_Price_Discriminating_Monopoly.pdf

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Sorakom (Baltic) Ngamdecho Department of Business Economics ECO 2201 Microeconomics Lesson 7.3 Price Discriminating Monopolist 1 Sorakom (Baltic) Ngamdecho Department of Business Economics Price Discriminating Monopolist ECO 2201 Lesson 7.3 1. Introduction 2. Conditions for Price Discrimination ì Monopoly Power ì Market Segregation ì No Resale (or No Arbitrage) 3. Erosion of Monopoly Power Review & Exercise Road Map 1
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Sorakom (Baltic) Ngamdecho Department of Business Economics ECO 2201 Microeconomics Lesson 7.3 Price Discriminating Monopolist 2 1. Introduction ì What is price discrimination? ì Firms engage in price discrimination if charging different buyers different prices. ì Consumers with less elastic demands are charged higher prices ì Consumers with more elastic demands are charged lower prices ì Price differences are not based on cost differences . 2 ì What is price discrimination? ì Total profit is larger than it would be with no discrimination and a single price. 1. Introduction 3 MC = ATC MC = ATC Q b Q s P s P b P P MR b MR s D b D s (a) Small businesses (b) Students Economic profit Economic profit
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Sorakom (Baltic) Ngamdecho Department of Business Economics ECO 2201 Microeconomics Lesson 7.3 Price Discriminating Monopolist 3 Example 1: Price Discrimination ì Airline ticket price difference ì Business travelers (inelastic demand) ì Leisure travelers (elastic demand) ì Movie ticket price difference ì Evening (inelastic demand) ì Afternoon matinee (elastic demand) ì BTS Sky Train ì Adult Pass ì Elderly Pass ì Student Pass 4 Example 1: Price Discrimination ì Volume discount ì
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