BEPP 250 Lecture Notes - Lecture 14: Marginal Cost, Playstation 3, Price Discrimination

• School: UPenn
• Department: Business Econ & Public Policy
• Course: BEPP 250
• Professor: Eduardo Azevedo

Document Summary

Bepp 250 - business & economic public policy - lecture 14: 2nd degree price. Sony getting more revenue from hardcore gamers. Ms office having better & worse versions even though they cost the same (mc=0) Airline service classes & time of purchase change price. This is a price structure of an access fee t & price per unit p . This is a simplified version of many industries. Cs(p) is greater than or equal to t. Profit = t + pq - cs(q) T* = cs * p* = (70*70)/2 * 10. Note: when there is only one consumer, the optimal price will equal mc. Profit = (p-mc) (d1 + d2) + 2t1. Profit = (p-10) (180 - 2p) + (80-p) ^2. Derivative of profit = 180 - 2p - 2p + 20 - 160 + 2p do this to find max. T* = (80-20)(80-20)/2 = (or 1800 cents)