Lecture 5 - Advanced Pricing II Recall Three types of price...

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1 Advanced Pricing II Recall: Three types of price discrimination For all, need market power and ability to prevent arbitrage/resale Today……more second-degree price discrimination Two-part tariffs – Bundling Dynamic aspects of pricing Two-part tariffs Can be useful when consumers are choosing both whether to buy and how much to buy. Entry fee (tariff) - T * , and per-unit price - P * • Examples Phone service Bars with cover charge Online services Polaroid cameras and film/Razors and blades Bulk discount stores (Costco, BJ’s) Others? Simple Case: One Customer Type All consumers have the exact same downward sloping demand curve If only set a single price Q D MC MR P
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