平狄克微观经济学Pricing with Market Power.pptVIP

Chapter 11 Chapter 11 Pricing with Market Power Topics to be Discussed Capturing Consumer Surplus Price Discrimination Intertemporal Price Discrimination and Peak-Load Pricing The Two-Part Tariff Bundling Advertising Introduction Pricing without market power (perfect competition) is determined by market supply and demand The individual producer must be able to forecast the market and then concentrate on managing production (cost) to maximize profits Introduction Pricing with market power (imperfect competition) requires the individual producer to know much more about the characteristics of demand as well as manage production Capturing Consumer Surplus All pricing strategies we will examine are means of capturing consumer surplus and transferring it to the producer Profit maximizing point of P* and Q* But some consumers will pay more than P* for a good Raising price will lose some consumers, leading to smaller profits Lowering price will gain some consumers, but lower profits Capturing Consumer Surplus Capturing Consumer Surplus Price discrimination is the practice of charging different prices to different consumers for similar goods Must be able to identify the different consumers and get them to pay different prices Other techniques that expand the range of a firm’s market to get at more consumer surplus Tariffs and bundling Price Discrimination First Degree Price Discrimination Charge a separate price to each customer: the maximum or reservation price they are willing to pay How can a firm profit? The firm produces Q* ? MR = MC We can see the firm’s variable profit – the firm’s profit ignoring fixed costs Area between MR and MC Consumer surplus area between demand and price Price Discrimination If the firm can price discriminate perfectly, each consumer is charged exactly what they are willing to pay MR curve is no longer part of output decision Incremental revenue is exactly the price at which each unit is sold – the demand curve Additional profit from producing