Term
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Definition
| charging different prices to different consumers for similar goods |
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Term
| first-degree price discrimination |
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Definition
practice of charging each customer her reservation price
(e.g. buying a car - theyll try really hard to figure out how much youre willing to pay) |
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Term
| how to capture consumer surplus |
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Definition
- ideally, a firm would charge a higher price to consumers willing to pay more than P*.
- firm would also like to sell to consumers willing to pay prices lower than P*, but not by lowering prices for all customers |
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Term
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Definition
sum of profits on each incremental unit produced by a firm
- i.e. profit ignoring fixed costs
? |
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Term
| perfect price discrimination |
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Definition
[check this]
additional profit from producing and selling an incremental unit is now the difference between demand and marginal cost |
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Term
| second-degree price discrimination |
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Definition
practice of charging different prices per unit for different quantities of the same good or service
- can make consumers better off by expanding output and lowering cost
- there are economies of scale
- average and marginal costs are declining |
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Term
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Definition
practice of charging different prices for different quantities or "blocks" of a good
e.g. when apple products are released ... higher initial to capitalize on the initial rush |
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Term
| third-degree price discrimination |
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Definition
practice of dividing consumers into two or more groups with separate demand curves and charging different prices for each group
e.g. liquor repackaging to get high income people to pay premium prices while still making it possible for others to buy |
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Term
| how does a firm decide which prices to charge each group (in third-degree pricing)? |
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Definition
- however much is produced, total output should be divided between the groups so that marginal revenues for each are equal
- total output must be such that the marginal revenue for each group of consumers is equal to the marginal cost of production |
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Term
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Definition
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Term
| intertemporal price discrimination |
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Definition
separating consumers with different demand functions into different groups by charging different prices at different points in time
- initially, price is high
- firm captures surplus from consumers who have high demand for the good and are unwilling to wait to buy it
- later price is reduced to appeal to mass market
e.g. hardbound and paperback books
(this seems like apple, too) |
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Term
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Definition
| charging higher prices during peak periods when capacity constraints cause marginal costs to be high |
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Term
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Definition
form of pricing in which consumers are charged both an entry and a usage fee
e.g. cell phones -- monthly access fee and per-minute charges |
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Term
| [lots more in this chapter that we didn't go over in class] |
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Definition
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