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Chapter 11 - Chapter 11 P ricing with Market Power...

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Chapter 11: Pricing with Market Power - Capturing CS - Price Discrimination - Intertemporal Price Discrimination and Peak-Load Pricing - The Two-Part Tariff Recall, a firm monopoly power faces a downward sloping demand curve, and maximizes profit by …. P Q
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This is profitable, but there are two ways it could even be better: 1. Some consumers are willing to pay more than P M 2. Some consumers not will to pay P M , but still a price > MC Strategies to capture more CS: - Price discrimination - Tariffs & Bundling 11.2 Price Discrimination First Degree Price Discrimination charging each customer the max they are willing to pay (i.e. reservation price) Example P = 6 – Qd Q P TR MR 1 5 2 4 3 3 4 2 5 1 6 0
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Note, given price discrimination, the MR = ____. That is, the MR curve is the same as the _________ curve. Question: Where is the AR curve? 1 st Degree Price Discrimination : Find the Q where MR = MC. Identify PS and CS P Q
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Second-degree price discrimination charging different prices per unit for different quantities of the same good. Examples include electricity, water, heating fuel pricing
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