lecture21_slides (1)

lecture21_slides (1) - Econ 121. Intermediate...

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Unformatted text preview: Econ 121. Intermediate Microeconomics. Eduardo Faingold Yale University Lecture 21 Outline of the course I. Introduction II. Individual choice III. Competitive markets IV. Market failure Outline of the course I. Introduction II. Individual choice III. Competitive markets IV. Market failure Price Discrimination Suppose a monopolist with constant marginal cost of 5 faces a population that is heterogeneous in their willingness to pay. Half of the population has inverse demand function: p A .x A / D 15 NUL 10x A ; while the other half has demand p B .x B / D 20 NUL 5x B : Price Discrimination As a benchmark consider first what happens if the monopolist knows each individuals demand type ( A or B ). In that case, the monopolist can make a take-it-or-leave-it offer of a quantity-tariff pair .x A ;t A / to consumer A . Likewise, it can make a similar offer .x B ;t B / to consumer B . Price Discrimination The meaning of an offer .x;t/ is x D quantity to be consumed t D payment from the consumer to the monopolist. Thus, t is not a unit price . Rather, it is the total amount that the consumer must pay to consume x units....
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This note was uploaded on 03/10/2012 for the course ECON 121 at Yale.

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lecture21_slides (1) - Econ 121. Intermediate...

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