10. Differential Pricing

10. Differential Pricing - Principles of Microeconomics...

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Principles of Microeconomics Shomu Banerjee Emory University Fall 2011 10. Differential pricing
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Differential Pricing (DP) AirTran: $10 cheaper fare if you book online Amazon: Free shipping above $25 purchase A loose definition a.k.a. Price Discriminatio n a.k.a. Price Discriminatio n
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Pigou’s insight CS CS PS PS Buyer’s max. price Seller’s min. price Sale price CS CS PS PS
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Conditions necessary for DP Firm must have some market power Firm must be able to sort customers Firm must be able to prevent resale
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Customer sorting Perfect sorting: Individualized pricing Perfect sorting: Individualized pricing Imperfect sorting Imperfect sorting Customer-type distribution known before sale: Menu pricing Customer-type distribution known before sale: Menu pricing Customer’s type known before sale: Group pricing Customer’s type known before sale: Group pricing 1°DP 1°DP 3°DP 3°DP 2°DP 2°DP
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Personalized pricing (1° DP) Price Quantity 0 10 10 9 8 7 6 5 4 3 2 1 MC Demand 6
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This document was uploaded on 10/31/2011 for the course ECON 101 at Emory.

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10. Differential Pricing - Principles of Microeconomics...

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