oligopoly-ho_002

oligopoly-ho_002 - Non-uniform Pricing Oligopoly Oligopoly...

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Non-uniform Pricing Oligopoly Cournot Bertrand Oligopoly Chapter 27
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Non-uniform Pricing Oligopoly Cournot Bertrand Other Kinds of Non-uniform Pricing Two-part tariffs: lump-sum fee + constant price per unit Tie-in sales: can buy one product only if you buy another one as well Requirement tie-in Bundling (or package tie-in) Can think of these as a form of quantity (2nd degree) discrimination, where the average price per unit varies with the number of units purchased
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Non-uniform Pricing Oligopoly Cournot Bertrand Two-part Tariffs Lump-sum fee + per unit price E.g. telephone service (connection fee + per minute rate); club cover charges; NFL personal seat license Because of fixed fee, average price per unit is higher the fewer units you buy Uniform pricing: raise p above MC = earn more per unit, but lower CS Two-part tariff (ideal): capture each customer’s max potential CS by charging different lump-sum fees, then set p = MC Like with first degree PD, there is no inefficiency But monopolist reaps all gains-from-trade, so equity suffers
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Non-uniform Pricing Oligopoly Cournot Bertrand Tie-in Sales Requirement tie-in: E.g. Printer + ink/toner cartridges, razors + blades Helps firm identify heavy users, i.e. those with high WTP Bundling: E.g. Software such as Microsoft Windows + Internet Explorer, internet & cable service, preseason & regular season tickets, service + parts Allows firms that can’t price discriminate to charge different people different prices Profitability depends on tastes (negatively correlated demand for the two goods) and the ability to prevent resale
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Non-uniform Pricing Oligopoly Cournot Bertrand What is Oligopoly? Oligopoly is a kind of market structure, like monopoly or perfect competition An oligopolistic industry is an industry consisting of a few firms (duopoly = two firms) Example industries: auto, operating systems, mp3/music players, airlines
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This note was uploaded on 12/26/2011 for the course ECON 100B taught by Professor Kilenthong during the Fall '08 term at UCSB.

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oligopoly-ho_002 - Non-uniform Pricing Oligopoly Oligopoly...

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