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Chapter 18&12.3

Chapter 18 & 12.3 Intermediate Micro Notes

2 Pages
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Department
Economics
Course Code
ECON 2310
Professor
Johanna Goertz

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Chapter 12 18 MicroeconomicsPricing Strategies123 NASH EQUILIBRIUMThe Concept of Nash EquilibriumNash Equilibrium the strategy played by each individual is the best response to the strategies played by everyone elseSelfenforcing agreements every party to the agreement has a incentive to abide by it assuming that others do the sameNash Equilibrium in Games w Finely Divisible GoodsBest Response Function also known as reaction function shows the relationship between one players choice and the others best responseMixed StrategiesPure Strategy When a player chooses a strategy without randomizingMixed Strategy When a player uses a rule to randomize over the choice of a strategy Behaving unpredictably is sometimes an advantage 181 PRICE DISCRIMINATION PRICING TO EXTRACT SURPLUSPrice Discrimination charges different prices for different units of the same good Idea is to charge higher prices for units for which customers have a high willingness to pay then for Those units for which willingness to pay is low To be able to pay firm must have some market powerPerfect Price Discrimination If the monopolist knows perfectly the customers willingness to pay for each unit and can charge a different price for each unit Most of the time firms will not know customers willingness tp payObservable Customer Characteristics firm can distinguish consumers with high or low willingness to pay based on observable appearanceprice discriminateSelfSelection when a firm o
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