3. Price Discrimination Flashcards Preview

ECON2010 Industrial Economics > 3. Price Discrimination > Flashcards

Flashcards in 3. Price Discrimination Deck (13)
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1
Q

What is price discrimination?

A

Charging different prices for the same product (not based on cost differences)

2
Q

Conditions for price discrimination

A

Firm needs market power
Firm needs to be able to identify demand between consumers
Firm needs to be able to prevent arbitrage

3
Q

What is two part pricing?

A

It is where there is a fixed charge (F) and a price per unit (PQ)

4
Q

How does two part pricing effect welfare?

A

All surplus is extracted but it is all producer surplus

5
Q

When can the assumption of identical consumers be relaxed?

A

When pricing is personalised

6
Q

Which groups do monopolists charge higher prices to?

A

Those with inelastic demand

7
Q

What are the welfare effects of 3rd degree price discrimination?

A

They are ambiguous

8
Q

When does welfare decrease following a move from uniform pricing to 3rd degree price discrimination?

A

When total output decreases or is constant

9
Q

Properties of menu pricing

A

•p1>p2 and F1

10
Q

Is 2nd degree better than uniform pricing and 3rd degree price discrimination?

A

It is ambiguous

11
Q

Tying

A

Conditions the sale of one product on the purchase of others (not in fixed proportions) e.g. printers and cartridges

12
Q

Bundling

A

The practice of selling two or more products for one price (fixed proportions) e.g. package of TV channels

13
Q

When is bundling most advantageous?

A

When there is a high negative correlation of reservation values