BEPP 250 Lecture Notes - Lecture 13: Economic Surplus, Ferrari P, Perfect Competition
26 Mar 2015
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Bepp 250 - business & economic public policy - lecture 13: price discrimination. In a monopoly, consumer surplus still exists! Some firms are willing to pay more than they are actually paying. In a monopoly, deadweight loss still exists! Some consumers can"t afford the product right now but would but it at a lower price. So, some firms use price discrimination to reach more consumers & eliminate surplus. Ex) microsoft prices office differently based on: The number of features - ie. office home, office professional. Location of purchase - ie. different price in mexico vs. Firm with perfect knowledge of individual valuation can charge based on personalized prices. Firm offers different product quality/quantity so that consumers self select. Ie. cable bundles, airline prices determined when you buy. Firms set different prices in different markets. Ie. office in mexico vs. office in us.
