prcing_mkt_pwr_i

prcing_mkt_pwr_i - Overview: Pricing with Market Power I...

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Overview: Pricing with Market Power I • Price Discrimination – Object and Requirements • Types of Price Discrimination – Perfect Price Discrimination – Observable Market Segments – Consumer Self Selection
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0 20 40 60 80 100 120 02 04 06 08 01 0 0 1 2 0 Demand MR c c MR=MC 55 45 MC=AC The Monopoly Picture (again) Price Discrimination • Idea: Capture Consumer Surplus as Profits • Some Considerations: – May be seen as unfair – May be seen as anti-competitive (illegal in some B2B transactions : Robinson-Patman Act discussed later) – But may be necessary for viability of some products – Discounts for people who would otherwise not buy – Often improves efficiency
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Requirements for Price Discrimination •M a rk e t pow e r • Resale must be difficult • Knowledge of consumers’ preferences Types of Price Discrimination • Perfect Price Discrimination (Customized Pricing) • Pricing to Observable Market Segments • Consumer Self-Selection
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Perfect Price Discrimination
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prcing_mkt_pwr_i - Overview: Pricing with Market Power I...

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