lec20 - Economics 101A (Lecture 20) Stefano DellaVigna...

Info iconThis preview shows pages 1–6. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 101A (Lecture 20) Stefano DellaVigna April 7, 2009
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Outline 1. Pro f t Maximization: Monopoly 2. Price Discrimination 3. Oligopoly?
Background image of page 2
1P r o f t Maximization: Monopoly Nicholson, Ch. 11, pp. 358-365 (Ch. 9, pp. 248— 255, 9th) Nicholson, Ch. 14, pp. 491-499 (Ch. 13, pp. 385— 393, 9th) Perfect competition. Firms small Monopoly. One, large f rm. Firm sets price p to maximize pro f ts. What does it mean to set prices? Firm chooses p, demand given by y = D ( p ) (OR: f rm sets quantity y .P r ic e p ( y )= D 1 ( y
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Write maximization with respect to y Firm maximizes pro f ts, that is, revenue minus costs: max y p ( y ) y c ( y ) Notice p ( y )= D 1 ( y ) First order condition: p 0 ( y ) y + p ( y ) c 0 y ( y )=0 or p ( y ) c 0 y ( y ) p = p 0 ( y ) y p = 1 ε y,p Compare with f.o.c. in perfect competition Check s.o.c.
Background image of page 4
Elasticity of demand determines markup: very elastic demand low mark-up relatively inelastic demand higher mark-up Graphically,
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 6
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 20

lec20 - Economics 101A (Lecture 20) Stefano DellaVigna...

This preview shows document pages 1 - 6. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online