Class Notes (811,155)
Canada (494,530)
AGEC 200 (18)

2012.11.01 - Oligopoly and Game Theory.docx

3 Pages
Unlock Document

McGill University
Agricultural Economics
AGEC 200
Anwar Naseem

Price Discrimination - Can’t happen in competitive market - If demand curves different, it is more profitable to set different prices in different markets - To maximize profit, the firm should set a higher price in markets with more inelastic demand - Arbitrage makes it difficult for firm to set different prices in different markets, thereby reducing profit from price discrimination o Arbitrage = if two segmented markets (student and normal for movies), students can’t resell to the general population  restrict ability to resell and redistribute product o Only way price discrimination would work is if restrict arbitrage - Clicker: Is price discrimination bad? Depends b/c total surplus is good, but to certain people is bad o Because consumer surplus is less…. - Answer is murky because if single price, what would maximize its profits? (two groups) o Why not lower price from the higher group so that SOME kids would buy o Usually total profits might be maximized at the higher group price o Problem with single price is it restricts output o Price discrim allows you to increase output = more people consuming = higher profit Tuition Discriminate - Have poor pay lower amount and rich pay higher amount  b/c tuition a certain price, but can get scholarships if poor - Because the rich ARE willing to pay and able to pay, where as the poor may not go to that school if cannot pay - Therefore the rich kind of like subsidizing the poor - More people get educated and the program can still be financially supported - McGill: Differentiating on where people are coming from … might be ? Tying - Another type of price discrimination - Printers and cartridges  very expensive to buy cartridges - Are firms selling you printer or something else? The ability to print - Some people are heavy printers, some want high quality prints - Why isn’t there comp in cartridge market?  b/c all companies have patent on specific cartridge - Therefore can charge whatever price.  monopolists in cartridge market - 1. Patents keep competition away - By tying, companies distinguish people who have high WTP and low WTP for printing - 2. Consumer Rationality  buy printer that’s on sale for $20. But then have to replace cartridge o The Right way is to figure out total cost of printing for however long o But as consumers we don’t think that way  see the sale price of printer but not of printing - Good or Bad? o Good because if company had charged very high price for printer, people may not buy  Since some people may not print a lot and it’s a high initial cost  But company can still spread R&D Cost o Bad bc mb total cost to make tying technology more than no tying = consumers lose - Discrim is people printing nore or less Bundling - ex: MS Office - two groups that would pay diff price for word and excel - But then only one person buys each (100 + 90) - But if bundle, then can raise price (bc getting more), and capture both people = $240 - Assuming that MC of making one extra unit of the excel or word to be 0  just copying disc Four Types of Market Structure Monopoly Oligopoly  few (not more than 4 or 5) firms. Monopolistic Competition - Certain amount of monopoly that each firm ha
More Less

Related notes for AGEC 200

Log In


Don't have an account?

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.