13

Yes, if there were more competition then net neutrality would not be such a big issue. Any throttling would cause an ISP to lose customers to competitors. Competition is a main assumption behind why markets work. However, in this case an ISP has market power which breaks the assumption. The market power allows them to easily put smaller ISPs out of business....


11

Varian has a paper on Price Discrimination and Social Welfare in which he gives some necessary and sufficient conditions for (third degree) price discrimination to increase welfare. A necessary condition is that the total level of output (i.e. the total number of consumers served) increases as a result of the discrimination. A sufficient condition is that ...


9

Price discrimination is generally welfare ambiguous. Basic example: A monopoly can price discriminate between two market segments. In segment A, there is one consumer with a willingness to pay of $\$1$ million and there are one million consumers with a willingness to pay of $\$1$. In segment B, there is one consumer willing to pay $\$1$ million and 400,000 ...


6

The viewpoint is this. The ISP is responsible for relaying internet traffic to their customers - they have different models for this, by "speed", by amount of data, etc and this is working reasonably well. Then new suppliers of content arrive, heavy 4k streaming - content which is far more susceptible to "errors" in transmission than in ye olde days. ...


4

Actually economics does not even officially use term price gouging. Your analysis is right, actually economists dislike anti-price gauging legislation for this reason. For example, when the IGM panel of top policy economists were asked about one piece of price gouging legislation in the US, vast majority disagreed with it: However, an important caveat to ...


3

There are no laws against "price gouging" where I live, at least the price of medical masks has increased 3-10 fold in the recent weeks, due to the coronavirus outbreak. Yet there is still a shortage of masks. (Also several other things.) Why is this? You write that in the absence of price gouging laws Supply would increase. Increased prices signal ...


3

Here is a counterexample (i.e. an example showing that the given statement is false). Assumptions: The cost of producing each unit of the good is \$1. All consumers are exactly identical, with each consumer willing to pay up to \$10 for one unit of the good. (Also, each consumer is willing to pay at most \$0 for a second unit of the good.) Market 1 has 200 ...


3

1st of all, you should distinguish cases from the Nike case and others, if any: Since Nike sells only a tiny portion of its shoes "irrationally" it cannot be seen as market value - equilibrium price, but rather as marketing expenses Think that simply generating a rare nike products market adds value to the brand and motivates consumers to prefer nike ...


3

There seems to be some research on price discounting. For example, this paper studies two forms of dicounting, last-minute discounting and early-bird discounting, in settings with monopoly, duopoly and competitive markets. They propose a model and run some experiments. Some excerpts from this paper: There might be many reasons for such a pricing policy [...


3

I believe this is just a horizontal sum. At the very top of your graph, only adult has a part of its curve above 10.25. So when your summing horizontally student =0 Adult = x, This changes once you are below 10.25, then all of a sudden you have student = x and adult = x. This additional amount from student causes the kink. If pretend student was always =0 ...


2

Assuming that market power is given, discrimination is always beneficial to agents whose indifference price is smaller than the optimal non-discriminatory price. This is because under discrimination, they will get the good at their indifference price. Without discrimination, they will not get the good at all.


2

A demand curve relates Quantity demanded to Price. If ice creams are always $2 then your data won't help you estimate a demand curve. Try offering some daily specials to create some price variation. No, people won't respond exactly the same way to a "discounted regular price" as they will to a lower everyday price, but still you will begin to gather the ...


2

I think You will have to account for various factors other than price. What is your purpose in estimating the demand curve? This link will give you a good explanation on how to estimate demand curves if you are looking for simple exposition - assuming that sales and other factors have linear relationship. If you are good at econometrics, you may want to ...


2

A lot of commentary seems to focus on monopoly and oligopoly among ISPs. I am of the opinion that the real issue behind net neutrality is not about market power. If this is really an issue of antitrust, why isn't the solution one of antitrust? (at least directly?) The real issue at stake seems to be one of ensuring the survival of the democratic nature of ...


2

MC = 2Q1 + 2Q2 for both demand functions. Set MR1 = 2Q1 + 2Q2, and MR2 = 2Q1 + 2Q1 and then you have a system of 2 unknowns and 2 equations. The solution ends up being Q1 = 15, P1 = 72.5, Q2 = 17.5, P2 = 82.5. In this case Profits under PD > Profits Under single price. See you in 468 tomorrow.


2

To sell 45 units to group 2 implies a price of $220-2Q_2=130$. At that price, demand from group 1 is zero. Indeed, the very most any consumer in group 1 is willing to pay is $100$.


2

Some reasoning: Incoming "Early-bird" discounts relate to a time window where quantity supplied is high - parking lots are empty waiting for today's customers. Since on the other hand quantity demanded is also high in this time window, it is natural to attribute the incoming early-bird discounts to price-competition between suppliers that attempt to ...


1

There is a behavioral literature that warns against `price gouging'. Two Nobel Prize winners, Richard Thaler and Daniel Kahneman, conducted surveys with Jack Knetsch. They report that 82% of survey respondents say that raising the price of a snow shovel when a snowstorm is approaching is unfair. The reasoning is based on Thaler's concept of 'transaction ...


1

Scholarships certainly count as price discrimination. Charging different prices to different groups of consumers for the same good is third degree price discrimination, which is what occurs with school sponsored scholarships. First degree price discrimination occurs when a firm charges a different price for every unit consumed, and while theoretically ...


1

Marginal cost is only guaranteed to be equal to marginal revenue in optima where $Y > 0$ (and when the profit function is concave, but in your case it is). If $$ MC(0) > MR(0) $$ the producing the first unit results in a loss, and a profit maximizing monopolist would not produce at all (if the profit function is concave). An example: I am willing to ...


1

In a nutshell, it is because people talk. Information asymmetry happens at the firm/consumer level. The consumer does not know exactly how much it costs the firm to produce a given product, nor are they able to discern the actual quality of the product without expert knowledge. But what they do know is the price of the product, and whether or not ...


1

This is just perfect price discrimination. Happens sometimes with niche drugs (where drug makers can know the ability of people to pay). In this scenario, consumer surplus is completely captured by suppliers.


1

The motivation for this assumption is to have a unique solution. In this article, it is necessary to prove the 1st lemma, i.e. the quasi-concavity of the profit function. You find a similar motivation in Tirole’s book (Industrial Organization, p. 156).


1

Consider what a downward sloping demand curve means. The first customer is willing to pay a higher price than the second customer and so on. Concretely, consider a first customer who is willing to pay \$1 million and a second customer willing to pay \$500 thousand. So if Nike prices at \$1 million a pair, it makes one pair and sells for \$1 million. If ...


1

I've always assumed the early cars spend the day blocked in by the later cars. The parking lots would want to get that first row filled up as icing on the cake, then let them sit there through the day as the cars they parked in the accessible ring arrived and left throughout the day.


1

Price discrimination is when a firm charges different prices for a homogeneous product to different consumers. In this example we see no such discrimination among consumers. This is just a case where there is competition between two firms.


1

Who can price discriminate ? First, the firm must have market power or else it cannot charge any customer more than the competitive price. A monopoly , an oligopoly firm , a monopolistically competitive firm or a cartel may be able to price discriminate. However, a perfect competitive firm cannot price discriminate. An ...


1

Market power required for price-discrimination? In my understanding, no. I'm pretty sure that one can show this mathematically, but I'll just give you the intuition. Price-discrimination (PD) increases profits, because it incorporates different price-elasticities by having different prices. Therefore, a firm that incorporates PD should make, c.p. more ...


1

As said previously, for current data you probably need to do some webscraping yourself. (There are tools out there to download for free.) I have also found this paper, which might be relevant: Benjamin Reed Shiller, 2013. "First Degree Price Discrimination Using Big Data," Working Papers 58, Brandeis University, Department of Economics and International ...


1

For current data, you could use a scraping program to collect data from firms' websites. This was the approach taken by a recent paper for airline pricing, so it would definitely work for your first example. In general, it should work for any market that has a significant online presence with universal price quoting. Retail sales should more or less satisfy ...


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