Tài liệu Microeconomics for MBAs 42 ppt

Chapter 12 Monopoly Power and

Pricing Decisions

Sometimes a firm can profit by charging different prices to different customers

without appearing to do so. This can be accomplished by putting the same price on two

products that are consumed together by some customers, but not by others. Consider the

owner of a theater who realizes that some customers are willing to pay more to go to the

movies than others are. Obviously, the owner would like to charge these customers

more. But the owner has no way of determining who the price-insensitive customers are

when they are paying for their tickets. So how does the manager charge the price￾insensitive customers more without losing the remaining customers?

There is a way that we have all observed, but probably didn’t think of as an

example of price discrimination. Assume that the theater owner believes that those

customers who are willing to pay the most to watch a movie are generally the ones who

most enjoy snacking while watching. If this assumption is correct (and we will argue in a

moment that it probably is), the owner takes advantage of the demand of the enthusiastic

movie watchers by charging a moderate price for the tickets to the movie and high prices

for the snacks sold in the theater lobby. By keeping the ticket prices moderate the

customers with a high demand elasticity for the movie will still buy a ticket since they are

not going to do much snacking anyway. While the low elasticity demanders will surely

complain about the high prices on all the snacks they eat, they still consider the total cost

of their movie experience acceptable since they were willing to pay more for their ticket

than they were charged.

If it were not true that those who are willing to pay the most to watch a movie also

enjoy snacking the most, then it is unlikely that we would observe such high prices for

snacks at the movies.25 For example, assume that the opposite were true, that those who

are not willing to pay much to watch a movie are the ones who enjoy snacking the most

when watching the movie. If this were the case, the owner of the theater would find that

charging moderate prices for the tickets and high prices for the snacks was not a very

profitable strategy. Since the avid movie watchers are not snacking much, they would be

willing to pay more than the moderate price to get into the theater. And since the other

customers care more about snacking than seeing the movie, they will see little advantage

in paying the moderate price for the movie when the snacks are so expensive. In this

case, the most profitable pricing strategy would be high-ticket prices and low snack

prices. The enthusiastic movie watchers would still come, and end up paying more. And

the snackers would now be willing to pay the high-ticket prices for the opportunity to eat

lots of cheap snacks.26 The fact that we do not see such pricing in theaters suggests that,

at least for more consumers than not, our assumption is correct.

25 It should be noted that some economists have argued that the high price for snacks at the movie theaters

reflect the higher cost of supplying them in movie theaters than in food stores. As opposed to food stores, the

snack shop in a movie theater is only open for a limited amount of time during the day. So, as the argument

goes, the overhead cost is spread over less time and fewer sales. For an elaboration of this argument, see John

R. Lott, Jr. and Russell D. Roberts, “A Guide to the Pitfalls of Identifying Price Discrimination,” Economic

Inquiry vol. 29, no. 1 (January 1991), pp. 14-23. We do not quarrel with this reasoning, but we also believe that

creative price discrimination provides at least part of the explanation for the high price of movie snacks.

26 Determining the exact combination of prices that maximize profits depends on the relative differences in

demand for the two types of customers. If, for example, the avid movie fans were willing to pay a

tremendously high price to see the movie and snackers could care less about the movie, but went into frenzies

of delight at the mere thought of a Snickers bar, then the best pricing policy would be an extremely high ticket