ECON 201 1st Edition Lecture 13 Tuesday 2 24 I Strategies of Price Discrimination A Price Discrimination 1 1st Degree Price discrimination Perfect Price Discrimination a Strategy Charge each consumer his or her individual maximum willingness and ability to pay b c d e f Willing to sell anything above the marginal cost With 1st Degree PD there is no Dead Weight Loss With 1st degree PD there is no Consumer Surplus How the strategy is implemented fast estimate learn each consumer s willingness and ability to pay and prevent resale Need full information about demand rd 2 3 Degree PD a Strategy Use a signal about buyers to determine if each is a high type or low type and charge different prices to each High or Low These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute b c How to implement this strategy Information required is just buyer type then charge same price to each type d Difference between 1st and 3rd is the amount of information they have about you as a buyer e By far the most common price discriminating strategy just takes a simple piece of information senior citizen student woman or male etc 3 2nd Degree PD a Strategy Charge different prices based on different quantities purchased Bundles i Ex price of small bag of chips in the check out line vs the large packages b How to implement this strategy Need no information about individual buyer type but set discrete bundle sites 4 Two Part Tariff a Strategy First charge a fee to acquire right to purchase goods Second charge price per unit b c A fee just to get in the door ex paying to enter a fair and then paying for the tickets to ride the roller coaster 5 College Bars Example a b Problem University is having problems with drunk college students spilling out into the streets after going to the bars c Allow firms aka bars to charge high prices d It will lower the amount of consumption while still being able to acquire profits e They aren t allowed to cover charge f Result Avoids having overly intoxicated college students on the campus streets and the bars can still make profit
View Full Document
Unlocking...