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chapter 3B, price discrimination - Coggle Diagram
chapter 3B
monopoly
sole seller, high barrier to enter and exit, unique product, price inelastic demand, imperfect knowledge of market
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suffer from X-inefficiency: lax cost controls, reward workers with huge bonuses and hire more staff than necessary
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oligopoly
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collusive firms
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mergers and acquisitions: reduces uncertainty for the firms, increase market power and product isomer price inelastic
monopolistic
large number of sellers, differentiated products, no barriers to exit and entry, imperfect knowledge of market
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price discrimination
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effects
positive
[FOR FIRMS] higher profits - increase price for the group of consumer with price inelastic demand (less than proportionate fall in demand when price rises)
[FOR CONSUMERS] cross subsidisation: lower price enable them to obtain good that they otherwise could not afford (i.e. cheaper bus fares for seniors) --> increase welfare
[FOR SOCIETY] allow production for products that otherwise be unprofitable : charge the consumers who value the product more, revenue made to cover for losses hence continue production
negative
loss of consumer's surplus: higher price charged to consumers with lower PED reduces their consumers surplus
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occurs at imperfect market: greater the market power, the more effective its ability to price discriminate