COMM 295 Chapter 10: COMM295 - Chapter 10 - Pricing with Market Power
Document Summary
Sales not only way a rm can charge different prices. Discounts based on booking in advance or bundled. A monopoly can increase its pro ts if it can use nonuniform pricing. Price depends on how many units are purchased. A rm selling at a single price will have tradeoff between high willing customers (will pay anything) and charging low enough price to capture some of those with lower willingness to pay. At the single price rm sets an intermediate price, by price discriminating, a rm can partially or entirely avoid this trade-off. With any kind of nonuniform pricing, you can increase pro t above uniform pricing level through two channels. Can extract additional consumer surplus from consumers who place a high value on the good and can simultaneously sell to new customers who would not be willing to pay pro t- maximizing uniform price. Tl;dr - capture more of the consumer surplus and sell to more customers.
