Lectures in Microeconomics-Charles W. Upton Price Discrimination-A Primer MR 1 =MR 2 =MC
Lectures in Microeconomics-Charles W. Upton Price Discrimination-A Primer MR 1 =MR 2 =MC.
Dec 21, 2015
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Lectures in Microeconomics-Charles W. Upton
Price Discrimination-A Primer
MR1=MR2=MC
Price Discrimination-A Primer
What is Price Discrimination?
–Selling the same good to different people at a different price.
Price Discrimination-A Primer
–My grandfather once told me…
Price Discrimination-A Primer
–And it is a good thing…
Price Discrimination-A Primer
Selling at Different Prices
Willingness to pay for a Word Processing Program
Smith $10
J ones $20
Wilson $30
Green $40
Brown $50
Price Discrimination-A Primer
Sales at Different Prices
Sales at Different Prices
Price Sales Total Sales
$10 5 $50
$20 4 $80
$30 3 $90
$40 2 $80
$50 1 $50
Price Discrimination-A Primer
Deadweight Loss
Willingness to pay for a Word Processing Program
Smith $10
J ones $20
Wilson $30
Green $40
Brown $50 DWL = $30
Price Discrimination-A Primer
Different Prices
Willingness to pay for a Word Processing Program
Smith $10
J ones $20
Wilson $30
Green $40
Brown $50
π = $150
DWL = $0
Price Discrimination-A Primer
The Basic Demand Function
D
MR
MC
Price Discrimination-A Primer
The Basic Demand Function
D
MR
MC
P*
Q*
Price Discrimination-A Primer
DWL
CS
The Basic Demand Function
D
MR
MC
P*
Q*
Price Discrimination-A Primer
The Basic Demand Function
D
MR
MC
P*
Q*
Price Discrimination-A Primer
Price Discrimination Basics
• No Arbitrage– To sell to different people at different prices,
you must be able to prevent re-sales.
• Identifying Customers– Or at least getting them to self-identify.
Price Discrimination-A Primer
The Hatfields and McCoys
QH = 35 - pH QM = 65 – pM
Price Discrimination-A Primer
The Hatfields and McCoys
QH = 35 - pH QM = 65 – pM
HH
H
P
MCP
1
MM
M
P
MCP
1
Price Discrimination-A Primer
The Hatfields and McCoys
QH = 35 - pH QM = 65 – pM
HH
H
P
MCP
1
MM
M
P
MCP
1
MR1=MR2=MC
Price Discrimination-A Primer
The Hatfields and McCoy's
MC MC
DM
DH
MR MR
PH
QMQH
Price Discrimination-A Primer
The Hatfields and McCoy's
5 5
DM
DH
MR MR
PM PH
QMQH
QM = 65 – pM
QH = 35 - pH
Price Discrimination-A Primer
The Hatfields and McCoy's
5 5
DM
DH
MR MR
PM PH
30 15
QM = 65 – pM
QH = 35 - pH
60 30
Price Discrimination-A Primer
The Hatfields and McCoy's
5 5
DM
DH
MR MR
PM PH
30 15
QM = 65 – pM
QH = 35 - pH
60 30
Price Discrimination-A Primer
The Hatfields and McCoy's
5 5
DM
DH
MR MR
35
20
30 15
QM = 65 – pM
QH = 35 - pH
60 30
Price Discrimination-A Primer
The Hatfields and McCoy's
5 5
DM
DH
MR MR
35
20
30 15
QM = 65 – pM
QH = 35 - pH
60 30
27.50
Price Discrimination-A Primer
The Hatfields and McCoy's
5 5
DM
DH
MR MR
35
20
30 15
QM = 65 – pM
QH = 35 - pH
60 30
27.50
Price Discrimination-A Primer
End
©2006 Charles W. Upton
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