迈克尔版本微观经济学-第十三章-Chapter13-SM.pptVIP

* * * * * * * * * Monopoly is inefficient. The inefficiency of monopoly is one of the key propositions in this chapter. Because P MR, and because MR = MC, P MC—single-price monopoly under-produces and creates deadweight loss. Rent seeking uses further resources so potentially the social cost of monopoly is the sum of the deadweight loss and the economic profit that a monopoly might earn. Adam Smith described the situation thus: “People in the same trade seldom meet together, even for merriment and diversion, but the conversation ends in some contrivance to raise prices.” * * * * * * * Price discrimination may not be fair, but it is efficient Aside from equity considerations, resources will be allocated more efficiently in a monopoly market under any price discrimination scenario than under a single-price scenario. * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Capturing Consumer Surplus Price discrimination captures consumer surplus and converts it into economic profit. A monopoly can discriminate Among groups of buyers. (Advance purchase and other restrictions on airline tickets are an example.) Among units of a good. Quantity discounts are an example. (But quantity discounts that reflect lower costs at higher volumes are not price discrimination.) Price Discrimination Copyright ? 2013 Pearson Canada Inc., Toronto, Ontario Profiting by Price Discriminating Figures 13.8 and 13.9 show the same market with a single price and price discrimination. As a single-price monopoly, this firm maximizes profit by producing 8 trips a year and selling them for $1,200 each. Price Discrimination Copyright ? 2013 Pearson Canada Inc., Toronto, Ontario Copyright ? 2013 Pearson Canada Inc., Toronto, Ontario By price discriminating, the firm can increase its profit. In doing so, it converts consumer surplus into economic profit. Price Discrimination Copyright ? 2013 Pearson Canada Inc., Toronto, Ontario Copyright ? 2013 Pears