E251x.F11.W11.Monopoly Pricing.Ch 11

E251x.F11.W11.Monopoly Pricing.Ch 11 - buyers see the same...

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ECON 251x Fall 2011 Week 11: October 31 – November 03, 2011 Monopoly Pricing Chapter 11 Efficiency ( Dead-Weight) Loss from reduced output ? The monopolist produces at Q m so the units from Q m to Qc are not produced. Since these units have a marginal cost of production that is less than the marginal value to buyers, there is a potential efficiency loss of the shaded area. (MV – MC) Price Discrimination: (Alternative Pricing strategies may eliminate the dead-weight Loss) A. 1 st Degree : Different prices for different buyers according to different Marginal Values 1. Auction 2. College scholarships 3. IBM Punch Cards 4. 5. 6. 7. 8. 9. B. 2 nd Degree : (Quantity forcing): Lower prices for additional units of the good. All
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Unformatted text preview: buyers see the same price schedule. Ex. Different sizes of drinks. Medium, Large, Ex-large, Gulp. C. 3 rd Degree : Different Prices to different Groups of buyers based on Different elasticities of demand. 1. Raise the price to the inelastic demanders. 2. Lower the price to the more elastic demanders. $Price Qty / Time MR Pm Q m Qc Marginal Cost MC 1. Grocery coupons 2. Theaters 3. Airlines & Hotels 4. Newly released unique products (Segway) 5. Prescription drugs in different countries. 6. Brand name Mixers (Holiday) 7. Mattresses: Match any advertised price 8. Menu (Freeway) 9. Menu (Chinese) D. Necessary Conditions for Successful Price Discrimination 1. Ability to identify and separate buyers by elasticity of demand. 2. Collect different prices from the different buyers 3. Prevent Resale...
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This note was uploaded on 02/11/2012 for the course ECON 251 at USC.

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E251x.F11.W11.Monopoly Pricing.Ch 11 - buyers see the same...

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