rlecture17 - monopoly pricing

rlecture17 - monopoly pricing - Topic 7: Monopoly (2)...

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opic 7: Monopoly (2) Topic 7: Monopoly (2) Pricing strategies (1) USC Marshall
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Pricing strategies ricing multiple products Pricing multiple products • Pricing durable goods • Price discrimination erfect price discrimination Perfect price discrimination – Price discrimination based on observables rice discrimination based on self- lection Price discrimination based on self selection – Bundling (multiple products) USC Marshall
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Pricing multiple products • A firm producing a single product (and facing a downward-sloping demand curve) prices at MR = MC • When a firm produces multiple (and related) products, it needs to account for the impact that the price of one product has on the demand for the other USC Marshall
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Pricing multiple products • Basic results: – A monopolist producing two substitutes prices both goods higher than if they were produced by two independent monopolists ow price/high output for one has a negative • Low price/high output for one has a negative externality on the profitability of the other good (cannibalization) – A monopolist producing two complements prices both goods lower than if they were produced by two dependent monopolists independent monopolists • Low price/high output for one has a positive externality on the profitability of the other good USC Marshall • Loss leaders – possibility of pricing one below MC
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Pricing multiple products Examples: – Microsoft should be pricing Windows and Office at prices below those chosen if Windows and Office were produced by two separate firms – Apple should be pricing different models of its iPods higher than if they were produced by eparate firms separate firms –… USC Marshall
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Pricing durable goods Durable goods: – Goods that last for several “periods” • Consumers can choose when to purchase – Consumers differ in their valuation of the product
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This note was uploaded on 09/10/2009 for the course BUAD 351 taught by Professor Eastin during the Spring '07 term at USC.

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rlecture17 - monopoly pricing - Topic 7: Monopoly (2)...

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