f**n
发帖数: 401 | 1 Standard textbook on price demand elasticity states that, for one single
commodity, demand d is a function of price p, s.t., d = d(p). If the
objective is to maximize revenue, the optimal price point p* is the point p
such that p*d(p) is maximized.
However, in reality even identical commodities are not sold at one universal
price. For example, TOYOTA CAMRY 2009 may have one MSRP (at least let us
assume so), but different dealers may offer you different discounts so that
the actual out-of-door pr | g****h
发帖数: 99 | 2 If the firm chooses optimal p to maximize p*d(p), it means you are talking
about a firm with some market power, say a monopolist. In that case, the
changing price elasticity of demand (Ed) is revealed in MR curve.
MR = P (1 + 1/ Ed)
Rewrite it, you can get optimal price as a function of Ed:
P = Ed* MC / (Ed + 1) | f**n
发帖数: 401 | 3 Thanks a lot for the reply. I am a novice in economics, so please bear with
me with my dumb questions.
1. the firm is not a monopolist; the market is competitive; the cost is
fixed and thus ignored. Does it mean that the initial model of p*d(p) does
not apply at all? Should I be looking for something like a perfect
competition model or a peak-load pricing model?
2. My problem with the initial p*d(p) model is, it assumes universal price
for all customers. This is not true in the case we study. Bu
【在 g****h 的大作中提到】
: If the firm chooses optimal p to maximize p*d(p), it means you are talking
: about a firm with some market power, say a monopolist. In that case, the
: changing price elasticity of demand (Ed) is revealed in MR curve.
: MR = P (1 + 1/ Ed)
: Rewrite it, you can get optimal price as a function of Ed:
: P = Ed* MC / (Ed + 1)
| g****h
发帖数: 99 | 4 I am not clear about what type of market you want to model.
If it is not monopoly, it still can be monopolistic competitive market. How
many firms in the market? Two, a few, numerous, or one dominant with many
fringe firms?
The seller accepts different prices from customers? You said earlier that
the firm sets price to maximize profit. It is confusing.
You do not do anything. Demand will always drop as you increase price except
for Giffen goods. There are many models of price discrimination. You | f**n
发帖数: 401 | 5 Many thank for the clarification.
In terms of monopoly, there are 5 or 6 major suppliers in the market with
some more fringe suppliers. Consumers perceive that there are non-price
differences among the competitors' products; producers have a degree of
control over price.
I think my initial confusion comes from my trying to combine elasticity and
price discrimination in one context. When we say "the firm sets price to
maximize profit", does it mean that you have to assume a single price first?
An
【在 g****h 的大作中提到】
: I am not clear about what type of market you want to model.
: If it is not monopoly, it still can be monopolistic competitive market. How
: many firms in the market? Two, a few, numerous, or one dominant with many
: fringe firms?
: The seller accepts different prices from customers? You said earlier that
: the firm sets price to maximize profit. It is confusing.
: You do not do anything. Demand will always drop as you increase price except
: for Giffen goods. There are many models of price discrimination. You
| g****h
发帖数: 99 | 6 When we say "the firm sets price to maximize profit", it does not mean we
have to assume a single price first. The price elasticity of demand is
already known when you have demand curve functions. So firms are actually
maximize profit after knowing its Ed at any price level.
As for the demand curve, firms may face a straight line single demand, a
kinked demand curve, or multiple demand curves for different kinds of
consumers or different scenarios. If you want to study the influence of Ed
on pri | f*****3
发帖数: 4 | 7 i guess you 'd better review the hopothesis of demand curve.
When we are talking about market structure, e.g. perfect competitive market,
the demand curve we used was an aggregated one, which contains every single
demand in the market.
However, when we are talking about the price discrimination, actually we
divided the market into some divisions, each of which have it's own demand
curve.
That's why the price gap exists. And whether the market structure is perfect
competitive or not makes little
【在 f**n 的大作中提到】
: Many thank for the clarification.
: In terms of monopoly, there are 5 or 6 major suppliers in the market with
: some more fringe suppliers. Consumers perceive that there are non-price
: differences among the competitors' products; producers have a degree of
: control over price.
: I think my initial confusion comes from my trying to combine elasticity and
: price discrimination in one context. When we say "the firm sets price to
: maximize profit", does it mean that you have to assume a single price first?
: An
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