Managerial Economics and Strategy, 2/e

10 Pricing with Market Power

Everything is worth what its purchaser will pay for it.

—Publilius Syrus (first century b.c.)

Learning Objectives

1. Identify the conditions necessary to price discriminate.

2. Show how a monopoly may use perfect price discrimination to extract all surplus from consumers.

3. Describe how a firm sets different prices for various consumer groups to raise its profit.

4. Demonstrate how a firm can increase its profit by charging prices based on the quantities consumers buy.

5. Show how charging an access fee and a per-unit price raises profit.

6. Describe the advantages of selling related products in a bundle.

7. Explain why firms charge higher prices in periods of peak demand.

Managerial Problem Sale Prices

Because many retail managers ...