Chapter 11 Pricing with Market Power Chapter Outline Capturing Consumer Surplus >Price Discrimination >Intertemporal Price Discrimination and Peak-Load Pricing The Two-Part Tariff >Bundling >Advertising
Chapter 11 Pricing with Market Power Chapter Outline ➢ Capturing Consumer Surplus ➢ Price Discrimination ➢ Intertemporal Price Discrimination and Peak-Load Pricing ➢ The Two-Part Tariff ➢ Bundling ➢ Advertising
11.1 Capturing Consumer Surplus Pmax $/Q P1 P* B P2 MC P D MR Q* Quantity Capturing Consumer Surplus
Capturing Consumer Surplus 11.1 Capturing Consumer Surplus
If a firm can charge only one price for all its customers, that price will be P*and quantity produced will be Q*. Ideally,the firm would like to charge a higher price that consumers are willing to pay more than P*,thereby capturing some of the consumer surplus under region A of the demand curve
If a firm can charge only one price for all its customers, that price will be P* and quantity produced will be Q*. Ideally, the firm would like to charge a higher price that consumers are willing to pay more than P*, thereby capturing some of the consumer surplus under region A of the demand curve
The firm would also like to sell to consumer willing to pay prices lower than P*,but only if doing so does not entail lowering the price to other consumers. In that way,the firm could also capture some of the surplus under region B of the demand curve
The firm would also like to sell to consumer willing to pay prices lower than P* , but only if doing so does not entail lowering the price to other consumers. In that way, the firm could also capture some of the surplus under region B of the demand curve
11,2 Price Discrimination Price discrimination-Practice of charging different prices to different consumers for similar goods. Reservation price-Maximum price that a customer is willing to pay for a good
11.2 Price Discrimination Price discrimination - Practice of charging different prices to different consumers for similar goods. Reservation price - Maximum price that a customer is wi1ling to pay for a good