301lec22

301lec22 - Lecture 22 Econ 301 Professor S. Severinov Price...

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Slide 1 Lecture 22 Econ 301 Professor S. Severinov Price Discrimination, Bundling
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Slide 2 Topics to be Discussed Capturing Consumer Surplus Price Discrimination Bundling and Tying, Two-part tariff Reading: chapter 11, 11.6 and intertemporal pricing excluded
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Slide 3 Pricing Pricing without market power (perfect competition): The law of one price, The Price is determined by market supply and demand.
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Slide 4 Pricing with Market Power Monopolies and oligopolies use different pricing techniques to capture the consumer surplus In a nutshell: a firm would like each customer to pay a different price equal to her valuation. This may not be completely, but there are different pricing techniques to make different customers pay different prices and get a higher profit overall
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Slide 5 Monopoly would like to charge different prices to different customers Quantity $/Q D MR P max MC P C The firm would like to charge higher price to those consumers willing to pay it - A P* Q* A P 1 Firm would also like to sell to those in area B but without lowering price to all consumers B P 2 Both ways will allow the firm to capture more consumer surplus
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Slide 6 Price Discrimination Price discrimination is the practice of charging different prices to different consumers for similar goods First-degree price discrimination : charging each customer her valuation for the good Possible only if each firm knows each customers valuation. Perfect price discrimination is almost never possible
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301lec22 - Lecture 22 Econ 301 Professor S. Severinov Price...

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