Presentation on theme: "Pricing To Capture Surplus Value. Capturing Surplus: By applying the price discrimination. Price discrimination: the practice of charging consumers different."— Presentation transcript:
Pricing To Capture Surplus Value
Capturing Surplus: By applying the price discrimination. Price discrimination: the practice of charging consumers different prices for the same good or service.
Price Discrimination: There are 3 types of price discrimination: 1. First degree price discrimination. 2. Second degree price discrimination. 3. Third degree price discrimination.
First Degree Price Discrimination: The practice of attempting to price each unit at the consumers reservation price. i.e. The consumers maximum willingness to pay for that unit.
Second Degree Price Discrimination: The practice of offering consumers a quantity discount.
Third Degree Price Discrimination: The practice of charging different uniform prices to different consumer groups or segments in a market.
Monopoly With Uniform Pricing Figure 12.3. Page 449 Price monopoly = Pm Output monopoly = Qm Producer surplus = G + H + K + L Consumer surplus = E + F Deadweight loss = I + N
Case: Suppose a monopolist has MC = 2, and faces the demand curve P = 20 – Q, there is no fixed cost Pm = ? Qm = ? PS = ? CS = ?