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

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Economics 101A (Lecture 20) Stefano DellaVigna November 5, 2009
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Outline 1. Price Discrimination II 2. Oligopoly? 3. Game Theory
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1 Price Discrimination II 1.1 Segmented markets Firm now separates markets Within market, charges constant per-unit price Example: cost function TC ( y )= cy. Market A: inverse demand function p A ( y ) or Market B: inverse function p B ( y )
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Pro f t maximization problem: max y A ,y B p A ( y A ) y A + p B ( y B ) y B c ( y A + y B ) First order conditions: Elasticity interpretation Firm charges more to markets with lower elasticity
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Examples: student discounts prices of goods across countries: airlines (US and Europe) books (US and UK) cars (Europe) drugs (US vs. Canada vs. Africa) As markets integrate (Internet), less possible to do the latter.
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2 Oligopoly? Extremes: Perfect competition Monopoly Oligopoly if there are n (two, f ve. ..) f rms Examples: soft drinks: Coke, Pepsi; cellular phones: Sprint, AT&T, Cingular,. ..
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Lecture 20 - Economics 101A(Lecture 20 Stefano DellaVigna...

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