Econ 1014 Exam 3 Notes.docx - Econ Exam 3 Pi symbol is monopoly profits Lecture 1 Friday October 20th 2017 Chapter 14 Price Discrimination charging more

Econ 1014 Exam 3 Notes.docx - Econ Exam 3 Pi symbol is...

This preview shows page 1 - 2 out of 4 pages.

Econ Exam 3 Pi symbol is monopoly profits Lecture 1: Friday October 20 th , 2017 Chapter 14: Price Discrimination - charging more than one price for the same product Arbitrage - makes it difficult for a firm to set different prices in different markets Perfect price discrimination leads to no deadweight loss Price discrimination increases output, then total surplus will increase o greater output reduces deadweight loss o monopoly PPD eliminates deadweight loss o easier for firms to cover fixed costs, so increases their incentives to innovate Lecture 2: Price Discrimination - Price Discrimination can increase gains from trade and welfare as compared to simple(single- priced) monopoly pricing Tying - consumption of one good requires the consumption of a second good produced by the same firm. Base product is cheap and variable product is expensive. leads to charging different prices to every consumer based on their willingness to buy the variable good. Bundling - Good gets bought alongside another good Price Discrimination can increase gains from trade and welfare as compared to simple(single-priced) monopoly pricing Gains from Trade Equation Chapter 15: monopoly - single firm running the market competitive firms - lots of firms in the market Oligopoly - few firms basing profits off of each other – high barriers to enter – prices are typically above competitive levels (P>MC) strategic Decision Making - decision-making in situations that are interactive Cartels (example of this behavior) o Attempt to move market from competitive to acting like a monopoly o Illegal in US to act like this o Production Quota to follow for each member Lecture 3: Game Theory – Models of strategic interaction, what is my best theory given my opponent Dominant strategy – best move regardless of what the opponent does o many games don’t have dominant strategies (Nash) Equilibrium is where both firms have their dominant strategy - a situation in which neither player has an incentive to change their behavior or response – there can be 2 Nash equilibriums The Prisoner’s Dilemma – (picture) Price Matching – a firm has no incentive to drop price because its competitor will get all the customers – changing Nash equilibrium Cartels – often break down for obvious reason More firms = more incentive to cheat OPEC – oil cartel – Saudi Arabia rules it – when someone pisses them off, they drive their production up leading to lower prices and less profits for the other firm Manufacturing cartels can break down in the long run because firms can still enter the market Sherman Act, Clayton Anti-Trust Act – prevents cartel like behavior Government-Supported Cartels o Poor nations use this to enrich themselves o US supports US Milk industry Lecture 4: Oligopoly – small number of competitors
Image of page 1
Image of page 2

You've reached the end of your free preview.

Want to read all 4 pages?

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern

Stuck? We have tutors online 24/7 who can help you get unstuck.
A+ icon
Ask Expert Tutors You can ask You can ask You can ask (will expire )
Answers in as fast as 15 minutes
A+ icon
Ask Expert Tutors