Chap009.8 - Using Discounts to Expand the Market Chapter 9:...

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8 Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 43 ± Profit-maximizing seller’s goal is to charge each buyer his/her reservation price. ± Limitations to price discrimination z Seller will not know each buyer’s reservation price. z Low price buyers could resell to other buyers at a higher price. Using Discounts to Expand the Market Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 44 ± The Hurdle Method of Price Discrimination z The practice of offering a discount to all buyers who overcome some obstacle. Using Discounts to Expand the Market Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 45 ± Examples of Price Discrimination z Mail-in rebates z Temporary Sales z Book publishers and paperback books z Automobile producers offer various models z Commercial air carriers z Movie producers
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Unformatted text preview: Using Discounts to Expand the Market Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 46 ± Is price discrimination bad? Using Discounts to Expand the Market Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 47 ± Economic Naturalist z Why might an appliance retailer instruct its clerks to hammer dents into the sides of its stoves and refrigerators? Using Discounts to Expand the Market Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 48 ± Summary z Single price monopolies are inefficient because P > MR. z Price discrimination reduces the inefficiency. z The more finely the seller can discriminate, the smaller the efficiency loss. z Some inefficiency likely to remain. Using Discounts to Expand the Market...
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This note was uploaded on 02/20/2012 for the course ECON 202 taught by Professor Brightwell during the Spring '08 term at Texas A&M.

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