【文章內容簡介】 rs have few choices and their demand is less elastic. ? Casual travelers have choices and are more price sensitive. 45 Chapter 1 Elasticities of Demand for Air Travel Price Ine Fare Category Elasticity FirstClass Unrestricted Coach Discount 46 Chapter 1 Airline Fares ? The airlines separate the market by setting various restrictions on the tickets. ? Less expensive: notice, stay over the weekend, no refund ? Most expensive: no restrictions 47 Chapter 1 Intertemporal Price Discrimination and PeakLoad Pricing ? Separating the Market With Time ? Initial release of a product, the demand is inelastic ?Book ?Movie ?Computer 48 Chapter 1 ? Separating the Market With Time ? Once this market has yielded a maximum profit, firms lower the price to appeal to a general market with a more elastic demand ?Paper back books ?Dollar Movies ?Discount puters Intertemporal Price Discrimination and PeakLoad Pricing 49 Chapter 1 Intertemporal Price Discrimination Quantity AC = MC $/Q Over time, demand bees more elastic and price is reduced to appeal to the mass market. Q2 MR2 D2 = AR2 P2 D1 = AR1 MR1 P1 Q1 Consumers are divided into groups over time. Initially, demand is less elastic resulting in a price of P1 . 50 Chapter 1 ? Demand for some products may peak at particular times. ? Rush hour traffic ? Electricity late summer afternoons ? Ski resorts on weekends Intertemporal Price Discrimination and PeakLoad Pricing PeakLoad Pricing 51 Chapter 1 ? Capacity restraints will also increase MC. ? Increased MR and MC would indicate a higher price. PeakLoad Pricing Intertemporal Price Discrimination and PeakLoad Pricing 52 Chapter 1 ? MR is not equal for each market because one market does not impact the other market. PeakLoad Pricing Intertemporal Price Discrimination and PeakLoad Pricing 53 Chapter 1 MR1 D1 = AR1 MC P1 Q1 Peakload price = P1 . PeakLoad Pricing Quantity $/Q MR2 D2 = AR2 Off load price = P2 . Q2 P2 54 Chapter 1 How to Price a Best Selling Novel ? What Do You Think? 1) How would you arrive at the price for the initial release of the hardbound edition of a book? 55 Chapter 1 How to Price a Best Selling Novel ? What Do You Think? 2) How long do you wait to release the paperback edition? Could the popularity of the book impact your decision? 56 Chapter 1 ? What Do You Think? 3) How do you determine the price for the paperback edition? How to Price a Best Selling Novel 57 Chapter 1 The TwoPart Tariff ? The purchase of some products and services can be separated into two decisions, and therefore, two prices. 58 Chapter 1 The TwoPart Tariff ? Examples 1) Amusement Park ?Pay to enter ?Pay for rides and food within the park 2) Tennis Club ?Pay to join ?Pay to play 59 Chapter 1 The TwoPart Tariff ? Examples 3) Rental of Mainframe Computers ?Flat Fee ?Processing Time 4) Safety Razor ?Pay for razor ?Pay for blades 60 Chapter 1 The TwoPart Tariff ? Examples 5) Polaroid Film ?Pay for the camera ?Pay for the film 61 Chapter 1 The TwoPart Tariff ? Pricing decision is setting the entry fee (T) and the usage fee (P). ? Choosing the tradeoff between freeentry and high use prices or highentry and zero use prices. 62 Chapter 1 Usage price P*is set where MC = D. Entry price T* is equal to the entire consumer surplus. T* TwoPart Tariff with a Single Consumer Quantity $/Q MC P* D 63 Chapter 1 D2 = consumer 2 D1 = consumer 1 Q1 Q2 The price, P*, will be greater than MC. Set T* at the surplus value of D2. T* TwoPart Tariff with Two Consumers Quantity $/Q MC A B C ABC e th an twicmore )()(2 21**?? xMCPT ????64 Chapter 1 The TwoPart Tariff ? The TwoPart Tariff With Many Different Consumers ? No exact way to determine P* and T*. ? Must consider the tradeoff between the entry fee T* and the use fee P*. ?Low entry fee: High sales and falling profit with lower price and more entrants. 65 Chapter 1 The TwoPart Tariff ? The TwoPart Tariff With Many Different Consumers ? To find optimum bination, choose several binations of P,T. ? Choose the bination that maximizes profit. 66 Chapter 1 TwoPart Tariff with Many Different Consumers T Profit a?:entry fee s?:sales TotalT* Total profit is the sum of the profit from the entry fee and the profit from sales. Both depend on T. entran tsnnQMCPTTnsa?????? )()()(???67 Chapter 1 The TwoPart Tariff ? Rule of Thumb ? Similar demand: Choose P close to MC and high T ? Dissimilar demand: Choose high P and low T. 68 Chapter 1 The TwoPart Tariff ? TwoPart Tariff With A Twist ? Entry price (T) entitles the buyer to a certain number of free units ?Gillette razors with several blades ?Amusement parks with some tokens ?Online with free time 69 Chapter 1 Polaroid Cameras ? 1971 Polaroid introduced the SX70 camera ? What Do You Think? ? How would you price the camera and film? 70 Chapter 1 Polaroid Cameras ? Hint cameras producing of cos tfilm producing of cos tsold cameras of numbersold film ofquantity camera of pricefilm of price ??????????)()()()(2121nCQCnQTPnCQCnTPQ?71 Chapter 1 Example Two different consumers group: bowling club 2 types of players, 1000 each. “Serious” with demand: Q1 = 6P “Casual” with demand: Q2 = Q is the playing hour per week and P is the fee per hour for each individual player. Fixed cost of club is $5000/week, no variable cost. How to price? (1). No price discrimination? (2). Two part tariff? 72 Chapter 1 Answer (1) No price