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Firms, prices, and markets (Lecture notes used in Prices and Markets)

Author: Van Zandt, Timothy INSEAD Area: Economics and Political SciencePublisher: 2006Language: EnglishDescription: 309 p. : Graphs ; 30 cm.Type of document: BookBibliography/Index: Includes bibliographical references
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Item type Current location Collection Call number Status Date due Barcode Item holds
Book Asia Campus
Archives
Print HB172 .V36 2006
(Browse shelf)
900177290
Consultation only 900177290
Total holds: 0

Includes bibliographical references

Digitized

Table of Contents Firms, Prices and Markets Firms. Pricesand Markets Math Review M.l M.2 M.3 M.4 M.5 M.6 M.7 M.8 ................................... Functions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Graphs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Inverse of a function . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The inverse of a linear function . . . . . . . . . . . . . . . . . . . . . . . . . Some nonlinear functions . . . . . . . . . . . . . . . . . . . . . . . . . . . Slope of a linear function . . . . . . . . . . . . . . . . . . . . . . . . . . . . Slope of a nonlinear function . . . . . . . . . . . . . . . . . . . . . . . . . . What math? Preliminaries Analytic Methodsfor Managerial Decision Making P.l P.2 P . 3 P4 . P.5 P6 . P . 7 ............................. The economist's notion of models . . . . . . . . . . . . . . . . . . . . . . . Smooth approximations . . . . . . . . . . . . . . . . . . . . . . . . . . . . Decomposition of decision problems . . . . . . . . . . . . . . . . . . . . . Marginal analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . The mathematics of marginal analysis . . . . . . . . . . . . . . . . . . . . . Wrap.up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Motives and objectives 1 Gains from Trade 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 ............................. Efficiency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Valuation. cost. and surplus . . . . . . . . . . . . . . . . . . . . . . . . . . One buyer and one seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . Many buyers and many sellers . . . . . . . . . . . . . . . . . . . . . . . . . Very many buyers and very many sellers . . . . . . . . . . . . . . . . . . . Sources of gains from trade . . . . . . . . . . . . . . . . . . . . . . . . . . Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Motives and objectives Motives and objectives 2 Supply. Demand. and Markets ............................. 2.2 Bargaining: One buyer and one seller . . . . . . . . . . . . . . . . . . . . . 2.3 Many buyers and many sellers: Equilibrium . . . . . . . . . . . . . . . . . . 2.4 Demand and supply: Graphical analysis . . . . . . . . . . . . . . . . . . . . 2.5 Consumer and producer surplus . . . . . . . . . . . . . . . . . . . . . . . . 2.6 Gains from trade in equilibrium . . . . . . . . . . . . . . . . . . . . . . . . 2.7 Taxes on transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 . 3 Consumer Choice and Demand ............................. 3 2 Interpretation of demand functions and curves . . . . . . . . . . . . . . . . 3.3 Elasticity of demand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Elasticity: Why 1 is a special value . . . . . . . . . . . . . . . . . . . . . . . 3.4 Elasticity of special demand curves . . . . . . . . . . . . . . . . . . . . . . 3.5 3.6 The reality of estimation of demand . . . . . . . . . . . . . . . . . . . . . . A model of consumer choice and welfare . . . . . . . . . . . . . . . . . . . 3.7 3.8 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.1 Motives and objectives 4 Production and Costs ............................. Short run and long run in production . . . . . . . . . . . . . . . . . . . . . 4.2 4.3 What to include in the costs . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 Economies of scale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5 A typical cost curve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.6 When are fixed costs important? . . . . . . . . . . . . . . . . . . . . . . . . 4.7 Pitfalls to avoid regarding fixed costs . . . . . . . . . . . . . . . . . . . . . 4.8 The leading examples of cost curves . . . . . . . . . . . . . . . . . . . . . . 4.9 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.1 Motives and objectives 5 Pricing with Market Power ............................. 5.2 From cost and demand to revenue and profit . . . . . . . . . . . . . . . . . 5.3 Profit-maximizing output level . . . . . . . . . . . . . . . . . . . . . . . . . Profit maximization versus social efficiency . . . . . . . . . . . . . . . . . . 5.4 The effect of a long-run fixed cost . . . . . . . . . . . . . . . . . . . . . . . 5.5 5.6 Wrap.up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 Motives and objectives 6 How Pricing Depends on the Demand Curve ............................. A case where the price does not change . . . . . . . . . . . . . . . . . . . 6.2 6.3 Marginal revenue and elasticity . . . . . . . . . . . . . . . . . . . . . . . . 6.4 The effect of an increase in marginal cost . . . . . . . . . . . . . . . . . . . 6.5 The price-sensitivity effect . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6 The volume effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 7 Combining the price-sensitivity and volume effects . . . . . . . . . . . . . . 6.8 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.1 Motives and objectives 7 Explicit Market Segmentation 7.1 7.2 7.3 7.4 129 129 130 133 136 ........................... Requirements for explicit market segmentation . . . . . . . . . . . . . . . Different prices for different segments . . . . . . . . . . . . . . . . . . . . Wrap.up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Motivationandobjectives Motives and objectives 8 Implicit Market Segmentation (Screening) 137 137 138 139 141 143 147 149 150 154 154 ............................. 8.2 Perfect price discrimination with unit demand . . . . . . . . . . . . . . . . 8.3 Screening: basic framework . . . . . . . . . . . . . . . . . . . . . . . . . . 8.4 Differentiatedproducts a screening . . . . . . . . . . . . . . . . . . . . . . s 8.5 Example: Software versioning . . . . . . . . . . . . . . . . . . . . . . . . . 8.6 Example: Airlines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.7 lntertemporal product differentiation . . . . . . . . . . . . . . . . . . . . . 8.8 Bundling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.9 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1 9 Nonlinear Pricing 157 157 157 159 161 164 167 168 9.1 ........................... 9.2 Perfect price discrimination. revisited . . . . . . . . . . . . . . . . . . . . . 9.3 More on nonlinear pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.4 An example of nonlinear pricing a screening . . . . . . . . . . . . . . . . s 9.5 Two-part tariffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.6 "Degrees" of price discrimination . . . . . . . . . . . . . . . . . . . . . . . Additional Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Motivationand objectives 10 Competitive Supply and Market Price ............................. 10.2 Supply and equilibrium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3 An individualfirm's supply decision . . . . . . . . . . . . . . . . . . . . . . 10.4 Aggregate supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.5 Equilibrium profits and very competitive markets . . . . . . . . . . . . . . 10.6 Variable input prices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.7 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.1 Motives and objectives 11 Short-Run Costs and Prices 11.1 11.3 11.4 11.5 Motives and objectives 189 ............................. 189 190 193 193 196 11.2 Short-run vs long-run cost ........................... Law of diminishing return . . . . . . . . . . . . . . . . . . . . . . . . . . . Short-runvs.long-run price and output decisions . . . . . . . . . . . . . . Short-runvolatility in competitive industries . . . . . . . . . . . . . . . . . . .................................. 11.7 A capacity-constraint model . . . . . . . . . . . . . . . . . . . . . . . . . . 11.8 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Additional Exercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.6 Overshooting 12 Static Games and Nash Equilibrium 12.1 12.2 12.3 12.4 12.5 12.6 12.7 ............................. Players. actions. and timing . . . . . . . . . . . . . . . . . . . . . . . . . . . Payoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Dominant strategies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Best responses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Equilibrium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Motives and objectives Motivation and objectives 13 lmperfect Competition 13.1 13.3 13.4 13.5 13.6 13.7 ........................... 13.2 Pricecompetition ................................ Price competition with perfect substitutes . . . . . . . . . . . . . . . . . . Cournot model: Quantity competition . . . . . . . . . . . . . . . . . . . . Quantity vs. price competition . . . . . . . . . . . . . . . . . . . . . . . . . Imperfect competition with free entry . . . . . . . . . . . . . . . . . . . . . Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Motivation and objectives 14 Explicit and Implicit Cooperation 14.1 14.2 14.3 14.4 14.5 ........................... Positive and negative externalities . . . . . . . . . . . . . . . . . . . . . . . Individual vs. collective action . . . . . . . . . . . . . . . . . . . . . . . . . Achieving cooperation through repeated interaction . . . . . . . . . . . . Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Strategic Commitment 15.1 15.2 15.3 15.4 15.5 15.6 15.7 ............................. Sequentialgames . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stackelberg games . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Stackelberg games with numerical actions . . . . . . . . . . . . . . . . . . Comparisons between Nash and Stackelberg . . . . . . . . . . . . . . . . . Examples using the basic principles . . . . : . . . . . . . . . . . . . . . . . Strategic commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Motives and objectives 15.8 Wrap-up ..................................... ............................. .................................. 16 Games with Incomplete Information 16.1 Motives and objectives 16.2 Privatevalues 16.3 Auctions 16.4 ..................................... Reputationand grains of doubt . . . . . . . . . . . . . . . . . . . . . . . . 17 Network Externalities 17.1 Motives and objectives 17.2 17.3 17.4 17.5 ............................. A two-consumer example . . . . . . . . . . . . . . . . . . . . . . . . . . . Large markets: A linear example . . . . . . . . . . . . . . . . . . . . . . . . A nonlinear example with multiple equilibria . . . . . . . . . . . . . . . . . Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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