price_discrimination

price_discrimination - Price Discrimination Lecture 2 -...

Info iconThis preview shows pages 1–9. Sign up to view the full content.

View Full Document Right Arrow Icon

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

View Full DocumentRight Arrow Icon

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

View Full DocumentRight Arrow Icon

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

View Full DocumentRight Arrow Icon

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

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

Unformatted text preview: Price Discrimination Lecture 2 - Connan Snider Econ 101 January 4 2010 Price Discrimination I Until now we have assumed that a firm charges a single price for its product I In reality, we often see firms charging different prices for the same product to different customers I This is known as Price Discrimination I Examples? Price Discrimination I Until now we have assumed that a firm charges a single price for its product I In reality, we often see firms charging different prices for otherwise identical products I This is known as Price Discrimination I Examples? I Air Fares I Newspaper Coupons I Student/Senior Discounts Requirements for Price Discrimination I In order to price discriminate a monopolist must be able to: 1. Identify different types of consumers - Market Segmentation 2. Prevent resale between the different types - Prevent Arbitrage I If the firm cannot segment markets it would just be charging different prices arbitrarily I If the firm cannot prevent arbitrage all the customers getting the low price could by from the monopolist and then sell to the high price customers, undercutting the high price I How do firms do this in practice? Requirements for Price Discrimination I In order to price discriminate a monopolist must be able to: 1. Identify different types of consumers - Market Segmentation 2. Prevent resale between the different types - Prevent Arbitrage I How do firms do this in practice? I Airlines - Business travelers purchase late/travel on particular days; Only the purchaser can use the ticket I Movie Theaters- Require a student id; Prevent arbitrage? There are Many Ways to Price Discriminate: Intel I A famous story about price discrimination involves Intel processors I Intel used to produce 1 type of processor: the Pentium I After the processor was produced, Intel intentionally partially disabled a fraction of the processors I The company sold these processors at a discount to less demanding, more price sensitive customers calling the new processor Celeron I If you pay attention you can see many examples of price discrimination First Degree Price Discrimination I If a monopolist can separately identify each buyer, it may be able to practice first degree (or perfect ) price discrimination I The firm charges a different price to each customer according to his/her willingness to pay First Degree Price Discrimination...
View Full Document

Page1 / 32

price_discrimination - Price Discrimination Lecture 2 -...

This preview shows document pages 1 - 9. Sign up to view the full document.

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