Unformatted text preview: has been observed that some individuals befriend managers at ou tlet
stores to purchase items at low prices (before shelving) and sell these items on Ebay a higher prices. If the seller cannot a rbitrage, it
may have to narrow the price gap between online and offline prices. We will examine this issue in 3 Degree price discrimination.
ECO 204 Chapter 16: Analysis of Firms with Market Power (this version 2012-2013) University of Toronto, Department of Economics (STG). ECO 204, S. Ajaz Hussain. Do not distribute. 30% [of executives] set all prices by matching rivals. This practice is valid in competitive markets but not in a market
setting where the firm has market power. This practice is all too common in marketing where managers set prices not
on the basis of optimization but not what other companies are doing. This is a case of the blind leading the blind.
28% [of executives] have no Internet pricing strategy: Needless to say, this deserves no comment. All too often, some
managers – particularly in family businesses -- set prices becau...
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