Industrial organisation

More on monopoly pricing

Two-part tariffs

Price discrimination

First degree price discrimination

Customer pays reservation price.

Requires firm to know reservation price.

Second degree price discrimination

Price varies by quantity ordered.

Third degree price discrimination

Different prices to different customer segments.

Natural sources of market power

Returns to scale

Network effects

Subscription services

Heterogeneous efficiency

Horizontal single good

Entry Rate (ER)

Entrant Relative Size (ERS)

Exiter Relative Size (XRS)

Exit Rate (XR)

Limit pricing

Horizontal mergers

Scale benefits.

Bresnahan-Reiss entry model

Horizontal single good



Restriction of access

Vertical mergers

Remove double margin.

Prevent supply to competitors.

Merger simulation

New product types

Identifying new products

eg car reach consumer needs in different ways, different way of looking at their demand function

Selling to customers

retail? to businesses (cold calling?)

Maintaining market share


Vertical production and margin squeeze

Practical pricing

The problem

Firms dont have access to elasticity information.

Base on existing competitors

Gross Profit Margin Target

What The Market Will Bare

intertemporal strategies: sales max, market share max


Putty-putty capital

Putty-clay capital