Price discrimination and bundling(1).pdf - Price discrimination and bundling Errol D\u2019Souza Email [email protected] 1 Errol D\u2019Souza Firms with market

Price discrimination and bundling(1).pdf - Price...

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1 Price discrimination and bundling Email: [email protected] Errol D’Souza
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2 Firms with market power face a downward sloping demand curve To sell an additional unit of output the firm must lower its price to the consumer who buys the additional unit as well as to all other consumers. As in order to gain an additional consumer the monop- olist has to lower price to all consumers it limits his incentive to serve more consumers Hence monopolist undersupplies product relative to efficient outcome. Errol D’Souza
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3 What if monopolist can charge different prices to different consumers? Price discrimination Errol D’Souza
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