Us law monopolization or attempt to monopolize ec law

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US law: Monopolization or attempt to monopolize EC law: Abuse of dominance Indian law: Concentration of economic power  (MRTP Act, 1969); abuse of dominant position  (Competition Act, 2002) Famous cases: Microsoft (EU and US):  Interoperability, Tying (IE, WMP) National Stock Exchange, India: Predatory pricing;  DLF: Unfair and discriminatory pricing strategy by  a dominant undertaking.  Monopolization and antitrust
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Pricing with market power PGP I Term I
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Discrimination is ‘Not’ a negative word here. Firms with market power can charge different  prices to different consumers or for different  quantities purchased.  Producer surplus increases by capturing  consumer surplus.  Social cost of monopoly may also reduce with  price discrimination.  Price discrimination
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Capturing consumer surplus Pm Q* MC P (=AR) MR Quantity Price Pc A B P1 P2 Requirements:  1. Market power 2. No Arbitrage 3. Identifying  different groups  of consumers
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First degree: Perfect price discrimination, hard to  find in real world Second-degree price discrimination:  Discrimination by self-selection, quantity related  price discrimination (quantity discounts, block  pricing) Third-degree price discrimination: Customer  specific price discrimination (based on observed  characteristics).  Two part tariff, inter-temporal price discrimination,  peak-load pricing. Types of price discrimination
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Third degree price  discrimination ε - ε - = ε - = ε - = = = = π = π - + = π 1 2 2 1 2 2 2 1 1 1 2 1 2 1 T 2 2 1 1 1 1 1 1 P P be,    will price   Relative 1 1 P MR   and   1 1 P MR   , Since MC MR MR   , or 0 Q Q : conditions   maximizing   Profit ) Q ( C Q P Q P
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Third degree price  discrimination MCT MRT D2 D1 MR2 MR1 Q1 Q2 QT P2 P1 quantity price
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Second degree price  discrimination AC MC D MR P M P2 P 1 QM P 3 Q1 Q2 Q3 quantity price
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Two-part pricing: A firm charges the consumers a fixed  fee (entry fee) and a variable fee which depends on the  units of consumption.  Examples: Retail electricity, landline and post-paid  phone connections, amusement parks, cricket club  memberships.  Works well for bundled products like razor and blades,  camera and films etc.  Two-part tariff: Entry fee and Usage fee
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Two part tariff: single and multiple consumers price price quantity quantity D D 1 D 2 MC MC a a b c Usage fee: P=MC Entry fee= Δ  abc Dtotal f e d c b g h i
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Service  provider Fixed  Fee   (Rs) Per  unit  charge  (p) Total  Units of  consum ption Total   Bills  (Rs) Airtel  (Tariff plan  1) 20 15 200 50 Airtel  (Tariff plan  2) 30 10 200 50 Non-linear pricing (two part  tariff) Units   consumed Airtel  (T1) Airtel (T2) 1 20.15 30.10 2 10.15 15.10 3 6.82 10.10 4 5.15 7.60 5 4.15 6.10 6 3.48 5.10 7 3.01 4.39 8 2.65 3.85 9 2.37 3.43 10 2.15 3.10
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Inter-temporal price  discrimination Quantity Price D2 D1 MR1 MR2 AC=MC P 1 P 2 Q1 Q2 AC=MC Quantity Price T=0 T=1
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Peak-load pricing-internet Quantity Price D1 D2 MR2 MR1 MC P 1 P 2 Q2 Q1 Quantity Price Night Daytime MC
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First degree price  discrimination quantity price p6 p5 p4 p3 p2 p1 D=AR MR MC
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  • Spring '12
  • AbhinavDhar
  • D1, MR2, Toyota MR2

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