lecture 19 - Economics 100A Lecture#19 Thursday Apr 1 1 2 3...

Info iconThis preview shows pages 1–13. Sign up to view the full content.

View Full Document Right Arrow Icon
Economics 100A Lecture #19: Thursday, Apr. 1 1) Second degree price discrimination 2) Block pricing 3) Two-part tariffs 4) 5) Tying and bundling
Background image of page 1

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

View Full DocumentRight Arrow Icon
(1) 2 nd Degree (“Quantity”) P.D. Price per unit (i.e., “average price”) varies with the number of units purchased Volume discount: average price falls Volume premium: average price rises
Background image of page 2
Examples of quantity discrimination Volume discounts UCB tuition Wholesale club membership Volume premia Parking at SFO Overtime wages Mixed pricing schedules Frequent flyer programs Cellular phone call plans
Background image of page 3

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

View Full DocumentRight Arrow Icon
Necessary conditions for 2 nd degree P.D. Volume discounts: Must prevent resale Otherwise, a consumer can make one large purchase, divide up, pass along lower AP “Not for resale” Volume premia: Must prevent repeat purchases Otherwise, consumer can make many small purchases, avoiding the rising AP “Limit one per customer”
Background image of page 4
Outlay schedule $ $/Q Q Q p×Q p MP AP MP AP Uniform pricing: Outlay = p×Q Volume discounts: AP falls, MP < AP Volume premia: AP rises, MP > AP
Background image of page 5

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

View Full DocumentRight Arrow Icon
Cellular phone service plans Bucket of “free” minutes for monthly (“entry”) fee Minutes over “allowance” pay a per minute charge $ Q E A p 1
Background image of page 6
(2) Block pricing Pay a different price for different “blocks” of units A two-block outlay schedule p 1 Q when 0 < Q < Q 1 p 1 Q 1 + p 2 (Q – Q 1 ) when Q > Q 1 p 1 > p 2 declining block p 1 < p 2 increasing block Q p 1 Q 1 $ +1 p 2 +1
Background image of page 7

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

View Full DocumentRight Arrow Icon
P 1 P 2 Q 1 Q MC Case of one type of consumer Q 2 D(P) MR P
Background image of page 8
0 P Q MC D(p) MR 55 45 100 2025 1012.5 1012.5 Single-Price Monopoly π = 2,025 CS = 1,012.5 DWL = 1,012.5 0 P Q D(p) Optimal Block Pricing 10 40 70 30 60 100 450 450 450 2700 π = 2,700 CS = 900 DWL = 450 MC
Background image of page 9

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

View Full DocumentRight Arrow Icon
P 1 P 2 Q 1s Q 1L Q 2L Q D - small D - large Additional CS MC Additional PS Two types of consumers
Background image of page 10
(3) Two-part tariffs Outlay consists of two parts E = entry fee, fixed $ amount for any quantity p = unit price, uniform price per unit Outlay = E + pQ (when Q > 0) Examples: subscription + usage charges Costco membership fee + store purchases Health club monthly fee + court fees Monthly cell subscription + texting charges Car rental per day + mileage charge
Background image of page 11

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

View Full DocumentRight Arrow Icon
Outlay for two-part tariff E $ Q MP = dE/dQ 1 1 AP = E/Q
Background image of page 12
Image of page 13
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 04/21/2010 for the course ECON 100A taught by Professor Woroch during the Spring '08 term at Berkeley.

Page1 / 31

lecture 19 - Economics 100A Lecture#19 Thursday Apr 1 1 2 3...

This preview shows document pages 1 - 13. Sign up to view the full document.

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