MICRO - class 1 - willingness to pay and continuing until...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Sept 15 EXAMPLE: There are 10 agents: all need a corneal transplant to improve their vision other agents do the surgery 8 corneas available (supply restriction scarcity) Know for a fact: what the most each agent is willing to pay for a cornea. Scenario 1: you control the distribution (sale) of corneas. Find a way to allocate the 8 corneas so that your revenue is greatest. By construction resale is not possible. This gives you the option of charging different people different prices. Auctions: the wealthiest may not pay the max amount they are willing to pay. Solution: extract maximum willingness to pay from agent, starting with the agent who has the greatest
Background image of page 1

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

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: willingness to pay and continuing until all corneas are allocated. revenue= 10+9+.+3 =52 Perfect price discrimination! Scenario 2: monopoly, resource waste. End up selling 5 or 6 corneas, meaning we wasted 2-3 corneas. Scenario 3: competitive equilibrium determine a price all sellers get $p all buyers pay $p all agents are passive equilibrium nothing is left over no agents want to change conjunction; p* =3, price cannot be higher than 3 you are giving the doctor 1 dollar. Scenario 4: Parado optimality. Impossible to move away from this situation without somebody being worse off....
View Full Document

This note was uploaded on 04/17/2010 for the course LAPS ECON2350 a taught by Professor Barrysmithandtasso during the Spring '10 term at York University.

Page1 / 2

MICRO - class 1 - willingness to pay and continuing until...

This preview shows document pages 1 - 2. Sign up to view the full document.

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