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17 Cards in this Set
- Front
- Back
price discrimination
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Practice of charging different prices to different consumers for similar goods
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reservation price
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maximum price that a customer is willing to pay for a good
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first-degree price discrimination
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Practice of charging each customer her reservation price
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Profit maximizing output
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Output at which marginal revenue is equal to marginal cost
MR = MC |
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variable profit
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sum of profits on each incremental unit produced by a firm; i.e., profit ignoring fixed costs
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perfect price discrimination
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charging each consumer exactl waht her or she is willing to pay.
The additional profit from producing and seeling an incremental unit is now the difference between demand and marginal cost. |
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imperfect price discrimination
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charging a few different prices based on estimates of customers' reservation prices
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second-degree price discrimination
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practice of charging different prices per unit for different quantities of the same good or service
(e.g., a single roll of Kodak film might be rpiced at $5, while a box containing four rolls of the same film might be priced at $14) |
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block pricing
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practice of charging different prices for different quantities of "blocks" of a good (by electric power comapnies, natural gas utilities, etc)
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third-degree price discrimination
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Practice of dividing consumers into two or more groups with sperate demand curves and charging different prices to each group (discounts to students and senior citizens)
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intertemporal price discrimination
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practice of separating consumers with different demand functions into different groups by charging different prices at different points of time.
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peak-load pricing
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practice of charging higher prices during peak periods when capacity constraints cause marginal costs to be high.
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two-part tariff
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form of pricing in which consumers are charged both an entry and usage fee
(e.g. theme park, golf club) |
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bundling
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practice of selling two or more products as a package
In general, the effectiveness of bundling depends on the extent to which demands are negatively correlated. It works best when consumers who have a high reservation price for good 1 have a low reservation price for good 2, and vice versa |
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mixed bundling
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practice of selling two or more goods both as a packange and individually
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pure bundling
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practice of selling products only as a package
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tying
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practice of requiring a customer to purchase one good in order to purchase another
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