MGMA01H3 Lecture Notes - Lecture 8: Prospect Theory, Marginal Revenue
Document Summary
Optimal monopolistic price: marginal revenue = marginal cost. Reservation price is the consumers highest willingness to pay. Negotiation/bargaining: determines what price the product is going to be sold for. Knowing the other person"s price, and point of view. Strategy 1: find out the lowest willingness to pay. Strategy 2: don"t let x person find out your willingness to pay. Prospect theory: composed by dan kahnemann and amos tresky, people are not rational all the time and when they are irrational, prospect theory gives us patterns that explain the irrationalities, 20 years ago.
