CAS AR 101 Lecture Notes - Lecture 20: De Beers, Bicycle Theft, Price Ceiling
26 Mar 2018
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Lecture 20: price discrimination, monopoly rents and social surplus. Between 5 10: loss society benefits (wtp > mc) the next 5 not produced dwl. Can sell at high prices or low prices depending on the wtp of customers. Et (cid:862)special(cid:863) price for each customer equal to each wtp. Without having to lower prices charged to others. If doing so, firm will maximize profits by producing the same quantity that would be produced in a competitive market. Price discrimination is difficult when goods are resold with low transaction cost. People could low their wtp sell them for the ones with high wtp. Price discrimination: more effective in the case of services. When monopolies cannot price-discriminate, price ceiling at competitive level. Lose amount of surplus equal to wtp for the bike. But: does not distribute the ss fairly to consumers: static costs: Ow(cid:374)er"s effort and expense in order to avoid theft (cost of locks: dynamic costs: (over time)
