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Price discrimination.
Transfer pricing
1
Pricing strategies and practices
Price discrimination.
2
Pricing strategies and practices
Price discrimination.
3
Pricing strategies and practices
Price discrimination.
4
Pricing strategies and practices
Price discrimination.
P1
PL
Demand
Q1 Q Quantity
5
Pricing strategies and practices
Price discrimination.
Price
P1
P2
PL
Demand
Q1 Q2 Q Quantity
6
Pricing strategies and practices
Price discrimination.
P1
P2
P3
PL
Demand
Q1 Q2 Q3 Q Quantity
7
Pricing strategies and practices
Price discrimination.
Q Quantity
8
Pricing strategies and practices
Price discrimination.
Note:
In 1st deg case=>different prices charged for
different consumers
In 2nd deg case=>different prices charged for
different quantities (for same consumer)
9
Pricing strategies and practices
Price discrimination.
Examples:
Telephone companies charging different prices for
different quantities
10
Pricing strategies and practices
Price discrimination.
P P
MC
D2 DT
D1 MR2 MRT
MR1
Q Q QT Q
Market1 Market 2 Mkt1&Mkt2
steeper D flatter D Q =Q +Q
T 1 2
11
Pricing strategies and practices
Price discrimination.
D2 DT
D1 MR2 MRT
MR1
Q Q QT Q
Market 2 Mkt1&Mkt2
Market1
Q =Q +Q
T 1 2
12
Pricing strategies and practices
Price discrimination.
P P
MC
D2 DT
D1 MR2 MRT
MR1
Q 1 Q Q 2 Q QT
13
Pricing strategies and practices
Price discrimination.
P P
MC
P
1
P 2
DT
D2
D1 MR2 MRT
MR1
Q 1 Q Q 2 Q QT
Multiple-product Pricing
Demand Interrelations
• Cross‑marginal revenue terms indicate how
product revenues are related to another.
Production Interrelations
• Joint products may compete for resources or be
complementary.
• A by-product is any output customarily produced
as a direct result of an increase in the production
of some other output.
15
Pricing strategies and practices
Q=QA=QB
MRT=MRA +MRB =MCQ
17
Pricing strategies and practices
Transfer pricing
• Three cases
• Products Without External Markets
• Products With Competitive External Markets
• Products With Imperfectly Competitive External
Markets
18
Pricing strategies and practices
Transfer pricing
No external markets
19
Pricing strategies and practices
Transfer pricing