Chapter11PricingwithMarketPower1Chapter1TopicstobeDiscussedCapturingConsumerSurplusPriceDiscriminationIntertemporalPriceDiscriminationandPeak-LoadPricing*Chapter1TopicstobeDiscussedTheTwo-PartTariffBundlingAdvertising*Chapter1IntroductionPricingwithoutmarketpower(petition)(cost)tomaximizeprofits.*Chapter1IntroductionPricingwithmarketpower(petition)requirestheindividualproducertoknowmuchmoreaboutthecharacteristicsofdemandaswellasmanageproduction.*Chapter1CapturingConsumerSurplusQuantity$/QDMRPmaxMCIfpriceisraisedaboveP*,*Q*P1Between0andQ*,consumerswillpaymorethanP*--consumersurplus(A).BP2BeyondQ*,pricewillhavetofalltocreateaconsumersurplus(B).*Chapter1CapturingConsumerSurplusP*Q*:singleP&******@MC=MRA:consumersurpluswithP*B:P>MC&consumerwouldbuyatalowerpriceP1:lesssalesandprofitsP2:increasesales&petitivepriceQuantity$/QDMRPmaxMCPCAP*Q*P1BP2*Chapter1CapturingConsumerSurplusQuantity$/QDMRPmaxMCPCAP*Q*P1BP2QuestionHowcanthefirmcapturetheconsumersurplusinAandsellprofitablyinB?AnswerPricediscriminationTwo-parttariffsBundling*Chapter1CapturingConsumerSurplusPricediscriminationisthechargingofdifferentpricestodifferentconsumersforsimilargoods.*Chapter1PriceDiscriminationFirstDegreePriceDiscriminationChargeaseparatepricetoeachcustomer:themaximumorreservationpricetheyarewillingtopay.*Chapter1
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