ECON 040 Lecture Notes - Lecture 21: Reservation Price, Strategic Dominance, Invisible Hand

9 views2 pages

Document Summary

Second degree price discrimination monopolist charges different prices based on the quantity demanded by each customer. Lower unit price for higher demand, higher unit price for lower demand. Essentially a bulk discount discounts allow the monopolist to distinguish consumers with high and low reservation prices without having to know them in advance. Can also be discriminated based on or the quality of the good/service: e. g. airline economy vs business vs first class allows companies to discriminate between high and low reservation price consumers. Third degree price discrimination monopolist charges different prices depending on observable consumers" attributes e. g. location. Change in surplus distribution from first-degree discrimination. Monopolist makes less profit, so surplus decreases. Italians and americans are better off than before. Strategic interactions between firms does not exist in perfectly competitive markets or monopolies. These strategic interactions are studied through game theory.

Get access

Grade+
$40 USD/m
Billed monthly
Grade+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
10 Verified Answers
Class+
$30 USD/m
Billed monthly
Class+
Homework Help
Study Guides
Textbook Solutions
Class Notes
Textbook Notes
Booster Class
7 Verified Answers

Related Documents

Related Questions