第11章有市场势力的定价-课件

1、Chapter 11Pricing with Market Power1Chapter 1Topics to be DiscussedCapturing Consumer SurplusPrice DiscriminationIntertemporal Price Discrimination and Peak-Load Pricing2Chapter 1Topics to be DiscussedThe Two-Part TariffBundlingAdvertising3Chapter 1IntroductionPricing without market power (perfect c

2、ompetition) is determined by market supply and demand.The individual producer must be able to forecast the market and then concentrate on managing production (cost) to maximize profits.4Chapter 1IntroductionPricing with market power (imperfect competition) requires the individual producer to know mu

3、ch more about the characteristics of demand as well as manage production.5Chapter 1Capturing Consumer SurplusQuantity$/QDMRPmaxMCIf price is raised above P*, the firm will lose sales and reduce profit.PCPC is the pricethat would exist ina perfectly competitivemarket.AP*Q*P1Between 0 and Q*, consumer

4、swill pay more than P*-consumer surplus (A).BP2Beyond Q*, price willhave to fall to create a consumer surplus (B).6Chapter 1Capturing Consumer SurplusP*Q*: single P & Q MC=MRA: consumer surplus with P*B: PMC & consumer would buy at a lower priceP1: less sales and profitsP2 : increase sales & and red

5、uce revenue and profitsPC: competitive priceQuantity$/QDMRPmaxMCPCAP*Q*P1BP27Chapter 1Capturing Consumer SurplusQuantity$/QDMRPmaxMCPCAP*Q*P1BP2QuestionHow can the firmcapture the consumer surplusin A and sell profitably in B?AnswerPrice discriminationTwo-part tariffsBundling8Chapter 1Capturing Cons

6、umer SurplusPrice discrimination is the charging of different prices to different consumers for similar goods.9Chapter 1Price DiscriminationFirst Degree Price DiscriminationCharge a separate price to each customer: the maximum or reservation price they are willing to pay.10Chapter 1P*Q*Without price

7、 discrimination,output is Q* and price is P*.Variable profit is the area between the MC & MR (yellow).Additional Profit From Perfect First-Degree Price DiscriminationQuantity$/QPmaxWith perfect discrimination, eachconsumer pays the maximumprice they are willing to pay.Consumer surplus is the area ab

8、ove P* and between0 and Q* output.D = ARMRMCOutput expands to Q* and pricefalls to PC where MC = MR = AR = D.Profits increase by the area above MCbetween old MR and D to outputQ* (purple)Q*PC11Chapter 1P*Q*Consumer surplus when a single price P* is charged.Variable profit when a single price P* is c

9、harged.Additional profit fromperfect price discriminationQuantity$/QPmaxD = ARMRMCQ*PCWith perfect discrimination Each customer pays their reservation priceProfits increaseAdditional Profit From Perfect First-Degree Price Discrimination12Chapter 1QuestionWhy would a producer have difficulty in achie

10、ving first-degree price discrimination?Answer1)Too many customers (impractical)2)Could not estimate the reservation price for each customerAdditional Profit From Perfect First-Degree Price Discrimination13Chapter 1Price DiscriminationFirst Degree Price DiscriminationThe model does demonstrate the po

11、tential profit (incentive) of practicing price discrimination to some degree.14Chapter 1Price DiscriminationFirst Degree Price DiscriminationExamples of imperfect price discrimination where the seller has the ability to segregate the market to some extent and charge different prices for the same pro

12、duct:Lawyers, doctors, accountantsCar salesperson (15% profit margin)Colleges and universities15Chapter 1First-Degree PriceDiscrimination in PracticeQuantityDMRMC$/QP2P3P*4P5P6P1Six prices exist resultingin higher profits. With a single priceP*4, there are few consumers andthose who pay P5 or P6 may

13、 have a surplus.Q16Chapter 1Second-Degree Price DiscriminationQuantity$/QDMRMCACP0Q0Without discrimination: P = P0 and Q = Q0. With second-degreediscrimination there are threeprices P1, P2, and P3.(e.g. electric utilities)P1Q11st BlockP2Q2P3Q32nd Block3rd BlockSecond-degree pricediscrimination is pr

14、icingaccording to quantityconsumed-or in blocks.17Chapter 1Second-Degree Price DiscriminationQuantity$/QDMRMCACP0Q0P1Q11st BlockP2Q2P3Q32nd Block3rd BlockEconomies of scale permit:Increase consumer welfareHigher profits18Chapter 1Price DiscriminationThird Degree Price Discrimination1) Divides the ma

15、rket into two-groups.2)Each group has its own demand function.19Chapter 1Price DiscriminationThird Degree Price Discrimination3)Most common type of pricediscrimination.Examples: airlines, liquor, vegetables, discounts to students and senior citizens.20Chapter 1Price DiscriminationThird Degree Price

16、Discrimination4) Third-degree price discrimination is feasible when the seller can separate his/her market into groups who have different price elasticities of demand (e.g. business air travelers versus vacation air travelers)21Chapter 1Price DiscriminationThird Degree Price DiscriminationObjectives

17、MR1 = MR2MC1 = MR1 and MC2 = MR2MR1 = MR2 = MC22Chapter 1Price DiscriminationThird Degree Price DiscriminationP1: price first groupP2: price second groupC(Qr) = total cost of QT = Q1 + Q2Profit ( ) = P1Q1 + P2Q2 - C(Qr)23Chapter 1Price DiscriminationThird Degree Price DiscriminationSet incremental f

18、or sales to group 1 = 0 24Chapter 1Price DiscriminationThird Degree Price DiscriminationSecond group of customers: MR2 = MCMR1 = MR2 = MC 25Chapter 1Price DiscriminationThird Degree Price DiscriminationDetermining relative prices 26Chapter 1Price DiscriminationThird Degree Price DiscriminationDeterm

19、ining relative prices Pricing: Charge higher price to group with a low demand elasticity 27Chapter 1Price DiscriminationThird Degree Price DiscriminationExample: E1 = -2 & E2 = -4 P1 should be 1.5 times as high as P228Chapter 1Third-Degree Price DiscriminationQuantityD2 = AR2MR2$/QD1 = AR1MR1Consume

20、rs are divided intotwo groups, with separatedemand curves for each group.MRTMRT = MR1 + MR229Chapter 1Third-Degree Price DiscriminationQuantityD2 = AR2MR2$/QD1 = AR1MR1MRTMCQ2P2QTQT: MC = MRTGroup 1: P1Q1 ; more elasticGroup 2: P2Q2; more inelasticMR1 = MR2 = MCQT control MCQ1P1MC = MR1 at Q1 and P1

21、30Chapter 1No Sales to Smaller MarketEven if third-degree pricediscrimination is feasible, it doesntalways pay to sell to both groupsof consumers if marginal cost is rising.31Chapter 1No Sales to Smaller MarketQuantityD2MR2$/QMCD1MR1Q*P*Group one, with demand D1, are not willing to pay enoughfor the

22、 good tomake pricediscrimination profitable.32Chapter 1The Economics of Coupons and RebatesThose consumers who are more price elastic will tend to use the coupon/rebate more often when they purchase the product than those consumers with a less elastic demand.Coupons and rebate programs allow firms t

23、o price discriminate.Price Discrimination33Chapter 1Price Elasticities of Demand for Users Versus Nonusers of CouponsToilet tissue-0.60-0.66Stuffing/dressing-0.71-0.96Shampoo-0.84-1.04Cooking/salad oil-1.22-1.32Dry mix dinner-0.88-1.09Cake mix-0.21-0.43Price ElasticityProductNonusersUsers34Chapter 1

24、Cat food-0.49-1.13Frozen entre-0.60-0.95Gelatin-0.97-1.25Spaghetti sauce-1.65-1.81Crme rinse/conditioner-0.82-1.12Soup-1.05-1.22Hot dogs-0.59-0.77Price ElasticityProductNonusersUsersPrice Elasticities of Demand for Users Versus Nonusers of Coupons35Chapter 1The Economics of Coupons and RebatesCake M

25、ixNonusers of coupons: PE = -0.21Users: PE = -0.4336Chapter 1The Economics of Coupons and RebatesCake Mix Brand (Pillsbury)PE: 8 to 10 times cake mix PEExamplePE Users: -4PE Nonusers: -237Chapter 1The Economics of Coupons and RebatesUsing: Price of nonusers should be 1.5 times usersOr, if cake mix s

26、ells for $1.50, coupons should be 50 cents 38Chapter 1Airline FaresDifferences in elasticities imply that some customers will pay a higher fare than others.Business travelers have few choices and their demand is less elastic.Casual travelers have choices and are more price sensitive.39Chapter 1Elast

27、icities of Demand for Air Travel Price-0.3-0.4-0.9 IncomeFare CategoryElasticityFirst-ClassUnrestricted CoachDiscount40Chapter 1Airline FaresThe airlines separate the market by setting various restrictions on the tickets.Less expensive: notice, stay over the weekend, no refundMost expensive

28、: no restrictions41Chapter 1Intertemporal PriceDiscrimination and Peak-Load PricingSeparating the Market With TimeInitial release of a product, the demand is inelasticBookMovieComputer42Chapter 1Separating the Market With TimeOnce this market has yielded a maximum profit, firms lower the price to ap

29、peal to a general market with a more elastic demand Paper back booksDollar MoviesDiscount computersIntertemporal PriceDiscrimination and Peak-Load Pricing43Chapter 1Intertemporal Price DiscriminationQuantityAC = MC$/QOver time, demand becomesmore elastic and price is reduced to appeal to the mass ma

30、rket.Q2MR2D2 = AR2P2D1 = AR1MR1P1Q1Consumers are dividedinto groups over time.Initially, demand is lesselastic resulting in a price of P1 .44Chapter 1Demand for some products may peak at particular times.Rush hour trafficElectricity - late summer afternoonsSki resorts on weekendsIntertemporal PriceD

31、iscrimination and Peak-Load PricingPeak-Load Pricing45Chapter 1Capacity restraints will also increase MC.Increased MR and MC would indicate a higher price.Peak-Load PricingIntertemporal PriceDiscrimination and Peak-Load Pricing46Chapter 1MR is not equal for each market because one market does not im

32、pact the other market.Peak-Load PricingIntertemporal PriceDiscrimination and Peak-Load Pricing47Chapter 1MR1D1 = AR1MCP1Q1Peak-load price = P1 .Peak-Load PricingQuantity$/QMR2D2 = AR2Off- load price = P2 .Q2P248Chapter 1How to Price a Best Selling NovelWhat Do You Think?1)How would you arrive at the

33、 price for the initial release of the hardbound edition of a book?49Chapter 1How to Price a Best Selling NovelWhat Do You Think?2)How long do you wait to release the paperback edition? Could the popularity of the book impact your decision?50Chapter 1What Do You Think?3)How do you determine the price

34、 for the paperback edition?How to Price a Best Selling Novel51Chapter 1The Two-Part TariffThe purchase of some products and services can be separated into two decisions, and therefore, two prices.52Chapter 1The Two-Part TariffExamples1)Amusement ParkPay to enterPay for rides and food within the park

35、2)Tennis ClubPay to joinPay to play53Chapter 1The Two-Part TariffExamples3)Rental of Mainframe ComputersFlat FeeProcessing Time4)Safety RazorPay for razorPay for blades54Chapter 1The Two-Part TariffExamples5)Polaroid FilmPay for the cameraPay for the film55Chapter 1The Two-Part TariffPricing decisio

36、n is setting the entry fee (T) and the usage fee (P).Choosing the trade-off between free-entry and high use prices or high-entry and zero use prices.56Chapter 1Usage price P*is set whereMC = D. Entry price T* is equal to the entire consumer surplus.T*Two-Part Tariff with a Single ConsumerQuantity$/Q

37、MCP*D57Chapter 1D2 = consumer 2D1 = consumer 1Q1Q2The price, P*, will be greater than MC. Set T* at the surplus value of D2.T*Two-Part Tariff with Two ConsumersQuantity$/QMCABC58Chapter 1The Two-Part TariffThe Two-Part Tariff With Many Different ConsumersNo exact way to determine P* and T*.Must cons

38、ider the trade-off between the entry fee T* and the use fee P*.Low entry fee: High sales and falling profit with lower price and more entrants.59Chapter 1The Two-Part TariffThe Two-Part Tariff With Many Different ConsumersTo find optimum combination, choose several combinations of P,T.Choose the com

39、bination that maximizes profit.60Chapter 1Two-Part Tariff withMany Different ConsumersTProfit:entry fee:salesT*Total profit is the sum of the profit from the entry fee andthe profit from sales. Both depend on T.61Chapter 1The Two-Part TariffRule of ThumbSimilar demand: Choose P close to MC and high

40、TDissimilar demand: Choose high P and low T.62Chapter 1The Two-Part TariffTwo-Part Tariff With A TwistEntry price (T) entitles the buyer to a certain number of free unitsGillette razors with several bladesAmusement parks with some tokensOn-line with free time63Chapter 1Polaroid Cameras1971 Polaroid

41、introduced the SX-70 cameraWhat Do You Think?How would you price the camera and film?64Chapter 1Polaroid CamerasHint65Chapter 1Pricing Cellular Phone ServiceQuestionWhy do cellular phone providers offer several different plans instead of a single two-part tariff with an access fee and per-unit charg

42、e?66Chapter 1BundlingBundling is packaging two or more products to gain a pricing advantage.Conditions necessary for bundlingHeterogeneous customersPrice discrimination is not possibleDemands must be negatively correlated67Chapter 1BundlingAn example: Leasing “Gone with the Wind” & “Getting Gerties

43、Garter.”The reservation prices for each theater and movie are:Gone with the Wind Getting Gerties GarterTheater A$12,000$3,000Theater B$10,000$4,00068Chapter 1BundlingRenting the movies separately would result in each theater paying the lowest reservation price for each movie:Maximum price Wind = $10

44、,000Maximum price Gertie = $3,000Total Revenue = $26,00069Chapter 1BundlingIf the movies are bundled:Theater A will pay $15,000 for bothTheater B will pay $14,000 for bothIf each were charged the lower of the two prices, total revenue will be $28,000.70Chapter 1BundlingNegative Correlated: Profitabl

45、e to BundleA pays more for Wind ($12,000) than B ($10,000).B pays more for Gertie ($4,000) than A ($3,000).Relative Valuations71Chapter 1BundlingIf the demands were positively correlated (Theater A would pay more for both films as shown) bundling would not result in an increase in revenue.Gone with

46、the Wind Getting Gerties GarterTheater A$12,000$4,000Theater B$10,000$3,000Relative Valuations72Chapter 1BundlingIf the movies are bundled:Theater A will pay $16,000 for bothTheater B will pay $13,000 for bothIf each were charged the lower of the two prices, total revenue will be $26,000, the same a

47、s by selling the films separately.73Chapter 1BundlingBundling Scenario: Two different goods and many consumersMany consumers with different reservation price combinations for two goods74Chapter 1Reservation Pricesr2(reservationprice Good 2)r1 (reservation priceGood 1)$5$10$5$10$6$3.25$8.25$3.25Consu

48、merAConsumerCConsumerBConsumer A is willing to pay up to $3.25 for good 1 andup to $6 for good 2.75Chapter 1Consumption Decisions WhenProducts are Sold Separatelyr2r1P2IIConsumers buyonly good 2P1Consumers fall intofour categories basedon their reservationprice.IConsumers buyboth goodsIIIConsumers b

49、uyneither goodIVConsumers buyonly Good 176Chapter 1Consumption DecisionsWhen Products are Bundledr2r1Consumers buy the bundlewhen r1 + r2 PB (PB = bundle price).PB = r1 + r2 or r2 = PB - r1Region 1: r PBRegion 2: r PB)Consumers donot buy bundle(r PB)77Chapter 1The effectiveness of bundling depends u

50、pon the degree of negative correlation between the two demands.Consumption DecisionsWhen Products are Bundled78Chapter 1Reservation Pricesr2r1P2P1If the demands are perfectly positivelycorrelated, the firmwill not gain by bundling.It would earn the sameprofit by selling the goods separately.79Chapte

51、r 1Reservation Pricesr2r1If the demands are perfectly negativelycorrelated bundling is the ideal strategy-all theconsumer surplus canbe extracted and a higherprofit results.80Chapter 1Movie Exampler2r1Bundling pays due to negative correlation(Wind)(Gertie)5,00014,00010,0005,00010,00012,0004,0003,000

52、BA81Chapter 1BundlingMixed BundlingSelling both as a bundle and separatelyPure BundlingSelling only a package82Chapter 1Mixed Versus Pure Bundlingr2r1102030405060708090100102030405060708090100C2 = MC2C2 = 30Consumer A, for example, has a reservation price for good 1 that is below marginal cost c1.Wi

53、th mixed bundling, consumer A is induced to buy only good 2, whileconsumer D is induced to buy only good 1,reducing the firms cost.ABDCC1 = MC1C1 = 20With positive marginalcosts, mixed bundling may be more profitablethan pure bundling.83Chapter 1BundlingScenarioPerfect negative correlationSignifican

54、t marginal costMixed vs. Pure Bundling84Chapter 1BundlingObservationsReservation price is below MC for some consumersMixed bundling induces the consumers to buy only goods for which their reservation price is greater than MCMixed vs. Pure Bundling85Chapter 1Bundling ExampleSell SeparatelyConsumers B

55、,C, and D buy 1 and A buys 2Pure BundlingConsumers A, B, C, and D buy the bundleMixed BundlingConsumer D buys 1, A buys 2, and B & C buys the bundle86Chapter 1Bundling ExampleSell separately$50$90-$150Pure bundling-$100$200Mixed bundling$89.95$89.95$100$229.90 C1 = $20 C2 = $30P1P2PBProfit87Chapter

56、1BundlingSell Separately3($50 - $20) + 1($90 - $30) = $150Pure Bundling4($100 - $20 - $30) = $200Mixed Bundling($89.95 - $20) + ($89.95 - $30) - 2($100 - $20 - $30) = $229.90C1 = $20 C2 = $3088Chapter 1BundlingQuestionIf MC = 0, would mixed bundling still be the most profitable strategy with perfect

57、 negative correlation?89Chapter 1Mixed Bundlingwith Zero Marginal Costsr2r12040608010020406080100120120In this example, consumers B and C are willing to pay $20 more for the bundle than are consumers A and D. With mixed bundling, the price of the bundlecan be increased to $120.A & D can be charged $

58、90 for a single good.C10901090ABD90Chapter 1Sell separately$80$80-$320Pure bundling-$100$400Mixed bundling$90$90$120$420P1P2PBProfitMixed Bundlingwith Zero Marginal Costs91Chapter 1BundlingQuestionWhy is mixed bundling more profitable with MC = 0?92Chapter 1BundlingBundling in PracticeAutomobile opt

59、ion packagesVacation travelCable television93Chapter 1BundlingMixed Bundling in PracticeUse of market surveys to determine reservation pricesDesign a pricing strategy from the survey results94Chapter 1Mixed Bundling in Practicer2r1The firm can first choose a pricefor the bundle and then try individu

60、alprices P1 and P2 until total profitis roughly maximized.P2PBPBP1The dots are estimates of reservation prices for a representative sample of consumers.95Chapter 1The Complete Dinner Versus a la Carte:A Restaurants Pricing ProblemPricing to match consumer preferences for various selectionsMixed bund