**Usually has something to do with the government** o Patent protected production period o Possible 100% ownership of a resource o Natural Monopoly might arise o Government might regulate the market (1 cable provider, etc.)
o Government provides monopoly (postal Service, Defense, etc.) **Monopolies still face competition** Monopoly Graph o the ½ rule states that the Marginal Revenue is going to half of what the Demand curve is in a monopoly o Where the MR intersects with the Marginal cost then it shows the revenue of the company because MR > MC, then that is the company’s revnue o Anything below MR < MC then they lose money o They base the price off of the quantity where they intersect with MR and MC and then look at the x-coordinate of the Demand curve Why won’t Coke get patent protection? o They don’t need to because its complicated to make and nobody knows what is in it o If they do get a patent then they have to say what is in the product 10/30: Price discrimination: charging different prices to different people for the same thing o 1 st Degree or Perfect Price-Discrimination charging every consumer exactly what each is willing to pay Good because we get the socially acceptable output We obtain the Quantityt that the monopoly perfect price discriminates Exs: Airlines Auctions, haggling College tuitions Car prices Accountants o 2 nd Degree/ “Bulk Pricing” rewards consumers who buy in bulk, especially if increase in quantity leads to an increase in returns to scale average cost Ex: Costco stuff Cereal: $3 for 10oz box, $4 for 20oz box Cell phone plans o 3 rd Degree/ “Segmentation” based on categorical ability to pay Ex: Company Segments: o Senior citizen discount o Student ID discount Self-selection: o gasoline octane (87,89,91,95)
o original coors vs. Killian’s o books (soft vs. hard cover) o Inter-temporal Price-discrimination two times exist: Now (high willingness to pay) vs. Later (low willingness to pay) Ex: New: o electronic gadgets o Fashion o DvD’s on release day Later o old electronic gadgets o DvD’s a year later o Sale rack later o Peak Load Pricing Peak demand will obtain a certain price for it with cyclical demand and capacity constraints, I charge a high price eat peak demand and low price at off peak to spread out sales Ex: Airlines (8 AM Monday vs 3 AM Thursday) Pizzerias (1000 pies/night) o Offer the people a higher price on a day that isn’t Friday Disney: peak, off peak, value, holiday pricing
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