19-Price Discrimination (II)

19-Price Discrimination (II) - 1 Agenda Course Overview...

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Unformatted text preview: 1 Agenda Course Overview Indirect Price Discrimination and Self-Selection Screening customers through Packages: iPad Pricing What To Take Away Microeconomics The Structure of the Course Consumers and Producers Market Interaction Todays lecture Uncertainty Perfect competition Monopoly and Pricing strategies Competitive Strategy Auctions Information in Markets and Agency Game Theory Introduction to Markets Consumer Theory and Demand Technology and Production 2 Agenda Course Overview Indirect Price Discrimination and Self-Selection Screening customers through Packages: iPad Pricing What To Take Away Indirect Price Discrimination Indirect Price Discrimination (Second Degree Price Discrimination) : Even though the monopolist does not know consumers reservation price, it can charge a different price per unit depending on when or how many units the consumer is buying. Quantity discounts are a typical example of second-degree price discrimination. Block pricing is also a typical example: Block pricing is the practice of charging different prices for different quantitites of blocks of a good (for example electric power companies). Two-part tariffs (in which consumers must pay a fixed fee just to be able to consume and then pay a price per unit) The key characteristic of indirect price discrimination is that the monopolist offers consumers different options for the consumer to choose from. Even though the monopolist does not know each consumers valuation he targets each package for different consumers. The monopolist must ensure, however, that there is no personal arbitrage: that the consumer for which a package is designed doesnt choose a different package. 3 Opera-ting through Volume Discounts Volume discounts is one way to indirectly discriminate between high and low valuation consumers. Effectively, the unit price paid by each consumer is different depending on the total amount purchased. Volume discounts is one way to indirectly discriminate between high and low valuation consumers. Effectively, the unit price paid by each consumer is different depending on the total amount purchased. For instance, Lyric Opera in Chicago offers package of 4,5,6 and 7 operas to subscribers (where the price per opera decreases as you purchase more). They combine this practice with bundling by offering different combinations of operas in the 4 , 5 and 6 opera package. Memberships and Two-Part Tariffs Semi-Private and Private Golf Clubs typically offer two options: Become a member (for a fixed fee) and play for a reduced green fee, or pay a (substantially higher) green fee as a visitor (no fixed fee required) The members are offered a two-part tariff: For a fixed-fee they have access to a different unitary price....
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19-Price Discrimination (II) - 1 Agenda Course Overview...

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