2019年系列讲座课件SimonCowanDepartmentofEconomicsandWorcester.pptVIP

Oligopoly Discrimination I Now both firms know the location of each consumer, i.e. x, and can offer individual prices Consider a consumer located near A with x ? Given the price that B offers, pB(x), A could offer a price that gives just as good a deal defined by pA(x) + tx = pB(x) + t(1 – x) So pA(x) = pB(x) + t(1 – 2x) pB(x) The firms compete for this customer until the less-favoured firm, B, just makes zero profit, i.e. pB(x) = c At this point A can win by pricing a penny lower than the price implied by the equally good deal equation: to find this set pB(x) = c in the equation, giving pA(x) = c + t(1 – 2x) * Oligopoly Discrimination II The discriminatory price schedules are: pA(x) = c + t(1 – 2x) for x ≤ 0.5 pA(x) = c for x 0.5 pB(x) = c for x 0.5 pB(x) = c + t(2x – 1) for x ? 0.5 Apart from the consumers at 0 and 1, every consumer pays less when there is price discrimination Profits per firm drop from t/2 to t/4 with discrimination * Prices and profits 0 1 c + t c + t 0.5 c * Oligopoly discrimination III The model has assumed “best-response asymmetry”, so the firms do not share the same view about which market will have the higher price once discrimination is allowed I want to price high in my back-yard, while you want to price low in my back-yard Alternatively there may be best-response symmetry: e.g. when the demand functions for each firm in a large market are both higher than those in a small market In this case price rises in the large market and falls in the small market * Summary Price discrimination is very common, and takes many forms The main aim of the discrimination analyzed here is to extract more surplus from consumers This usually has ambiguous welfare effects Discrimination is of antitrust concern, particularly in intermediate goods markets, when it is a sign of something else: excessive market power predatory pricing market foreclosure and exclusion * Reading, with annotations J. Tirole, Theory of Industrial Organization, 1988