L21 - Uniform pricing y p = 10 p Lecture 21 TC y = 1 2 y p...

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1 Lecture 21 Monopoly behavior Uniform pricing () 1 0 yp p = () 1 2 TC y y = + p y Elasticity and markup ε ΔΔ = Gains to trade, CS, PS and DWL 0 p = y = + p y
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2 How Should a Monopoly Price? ± The same price for each unit to every customer - uniform pricing . ± Price discrimination – many different prices for the same good ± Can price-discrimination earn a monopoly higher profits? Types of Price Discrimination ± 1st-degree : Prices may differ across output units and buyers. ± 2nd-degree : Prices may differ across output unit but not buyers. (E.g. bulk- buying discounts.) ± 3rd-degree : Prices may differ across buyers but not output units (student discounts) ± Two part tariff First-degree price discrimination () 1 0 yp p =− () 1 2 TC y y =+ p y First-degree Price Discrimination ± First-degree price discrimination gives a monopolist all of the possible gains-to-trade, buyers are with zero surplus, efficient amount of output.
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3 Third-degree Price Discrimination ± Market has segments - groups of buyers (seniors, students, adults) ± In each segment the same price ±
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This note was uploaded on 06/04/2011 for the course ECON 301 taught by Professor Hansen during the Spring '08 term at University of Wisconsin.

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L21 - Uniform pricing y p = 10 p Lecture 21 TC y = 1 2 y p...

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