11.2.1 First-degree price discrimination First-degree price discrimination-Practice of charging each customer her reservation price. ▣Variable profit(何变利润)-Sum of profits on each incremental unit produced by a firm;i.e.,profit ignoring fixed costs
11.2.1 First-degree price discrimination First-degree price discrimination - Practice of charging each customer her reservation price. Variable profit (可变利润)-Sum of profits on each incremental unit produced by a firm; i.e., profit ignoring fixed costs
Consumer surplus when a Pmax single price p*is charged CP*E Variable profit when a CKG single price P*is charged $/Q Additional profit from perfect price discrimination CKF P D=AR K MR Q* Q+* Quantity Additional Profit from Perfect First-Degree Price Discrimination
Additional Profit from Perfect First-Degree Price Discrimination D A C CP*E E F G K CKF CKG
Because the firm charges each consumer her reservation price, it is profitable to expand output to Q**.When only a single price, P*is charged,.the firm's variable profit(可变利润)is the area between the marginal revenue and marginal cost curves. With perfect price discrimination,this profit expands to the area between the demand curve and the marginal cost curve
Because the firm charges each consumer her reservation price, it is profitable to expand output to Q**. When only a single price, P* is charged, the firm’s variable profit (可变利润) is the area between the marginal revenue and marginal cost curves. With perfect price discrimination, this profit expands to the area between the demand curve and the marginal cost curve
$/Q P MC MR Quantity First-Degree Price Discrimination in Practice
First-Degree Price Discrimination in Practice
Firms usually don't know the reservation price of every consumer,but sometimes reservation prices can be roughly identified.Here,six different prices are charged. The firm earns higher profits,but some consumers may also benefit.With a single price P*,there are fewer consumers
Firms usually don't know the reservation price of every consumer, but sometimes reservation prices can be roughly identified. Here, six different prices are charged. The firm earns higher profits, but some consumers may also benefit. With a single price P*4 , there are fewer consumers