CHP 11

block pricing

another example of second degree price discrimination. practice of charging different prices for different quantities or "blocks" of a good.

two part tariff

form of pricing in which consumers are charged both and entry and a usage fee. ex: buy the razor then have to buy the blades

reservation price

max price that a consumer is willing to pay for a good

second degree price discrimination

practice of charging different prices per unit for different quantities of the same good or service. ex: single roll of kodak film is $5 and a box containing 4 rolls is $14 making the avg price per roll $3.50. sell to low end consumer at highest possible price, discount high end product so high end consumer doesn't buy low end product

price discrimination

practice of charging different prices to different consumers for similar goods

first degree price discrimination

practice of charging each customer her reservation price. total welfare increases but consumers walk away with no consumer surplus

third degree price discrimination

practice of dividing consumers into two or more groups with separate demand curves and charging different prices to each group. ex: movie tickets discounts to students and senior citizens

tying

practice of requiring a consumer to purchase one good in order to purchase another

bundling

practice of selling two or more products as a package. ex: microsoft office

pure bundling

selling products only as a package

mixed bundling

selling two or more goods both as a package and individually

variable profit

sum of profits on each incremental unit produced by a firm; i.e., profit ignoring fixed prices