ECON-UA 2 Lecture Notes - Price Discrimination, Oligopoly, Externality
8 May 2014
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Suppose 3 is the max output level, then we know from 2 to 3 mr > mc, and from 3 to 4 mr < Perfect price discrimination: each customer is charged the most they are willing to pay. Requirements: few firms 2, not too many to violate #2, strategic interaction. Barriers to entry: economies of scale natural oligopoly, legal barriers (look at monopoly notes, network externalities, predatory behavior, reputation. If their competitors lower price all firms demand curve shifts left. A + b commit serious crime, arrested for a lesser crime, police want confession about the more serious crime. A + b are separated and each is offered a deal s. Strictly dominant strategy: a strategy that is always better for a player, no matter what the other player does. Weakly dominant strategy: a strategy that is at least as good as any other and better than any other for at least one choice made by the other player.
