Timothy Van Zandt - Insead

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ii Firms, Prices, and Markets 2.9 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52 AdditionalExercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54 3 Consumer Choice and Demand 57 3.1 Aroadmap . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 3.2 Motivesandobjectivesofthischapter . . . . . . . . . . . . . . . . . . . . 58 3.3 Amodelofconsumerchoiceandwelfare . . . . . . . . . . . . . . . . . . . 59 3.4 Interpretationofdemandfunctionsandcurves . . . . . . . . . . . . . . . 61 3.5 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 AdditionalExercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65 4ProductionandCosts 67 4.1 Motivesandobjectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67 4.2 Shortrunandlongruninproduction . . . . . . . . . . . . . . . . . . . . . 68 4.3 Whattoincludeinthecosts . . . . . . . . . . . . . . . . . . . . . . . . . . 69 4.4 Economiesofscale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 4.5 Atypicalcostcurve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74 4.6 Whenarefixedcostsimportant? . . . . . . . . . . . . . . . . . . . . . . . . 77 4.7 Pitfallstoavoidregardingfixedcosts . . . . . . . . . . . . . . . . . . . . . 80 4.8 Theleadingexamplesofcostcurves . . . . . . . . . . . . . . . . . . . . . . 83 4.9 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 AdditionalExercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 5 Competitive Supply and Market Price 93 5.1 Motivesandobjectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93 5.2 Supplyandequilibrium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 5.3 Anindividualfirm’ssupplydecision . . . . . . . . . . . . . . . . . . . . . . 97 5.4 Aggregatesupply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100 5.5 Equilibriumprofitsandverycompetitivemarkets . . . . . . . . . . . . . . 102 5.6 Variableinputprices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109 5.7 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110 AdditionalExercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 6 Short-Run Costs and Prices 113 6.1 Motivesandobjectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 6.2 Short-runvs.long-runcost . . . . . . . . . . . . . . . . . . . . . . . . . . . 114 6.3 Lawofdiminishingreturn . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 6.4 Short-runvs.long-runpriceandoutputdecisions . . . . . . . . . . . . . . 117 6.5 Short-runvolatilityincompetitiveindustries . . . . . . . . . . . . . . . . . 120 6.6 Overshooting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 121 6.7 Acapacity-constraintmodel . . . . . . . . . . . . . . . . . . . . . . . . . . 123 6.8 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 AdditionalExercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129
Table of Contents iii 7 Pricing with Market Power 131 7.1 Motivesandobjectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 131 7.2 Fromcostanddemandtorevenueandprofit . . . . . . . . . . . . . . . . . 132 7.3 Profit-maximizingoutputlevel . . . . . . . . . . . . . . . . . . . . . . . . . 133 7.4 Profitmaximizationversussocialefficiency . . . . . . . . . . . . . . . . . . 136 7.5 Theeffectofalong-runfixedcost . . . . . . . . . . . . . . . . . . . . . . . 142 7.6 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 144 AdditionalExercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145 8 Elasticity of Demand 147 8.1 Motivesandobjectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 8.2 Measuringelasticity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148 8.3 Elasticitywithrespecttootherparameters . . . . . . . . . . . . . . . . . . 150 8.4 Elasticityofspecialdemandcurves . . . . . . . . . . . . . . . . . . . . . . 151 8.5 Therealityofestimationofdemand . . . . . . . . . . . . . . . . . . . . . . 154 8.6 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 155 AdditionalExercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 156 9 How Pricing Depends on the Demand Curve 157 9.1 Motivesandobjectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 9.2 Acasewherethepricedoesnotchange . . . . . . . . . . . . . . . . . . . 158 9.3 Marginalrevenueandelasticity . . . . . . . . . . . . . . . . . . . . . . . . 159 9.4 Theeffectofanincreaseinmarginalcost . . . . . . . . . . . . . . . . . . . 161 9.5 Theprice-sensitivityeffect . . . . . . . . . . . . . . . . . . . . . . . . . . . 163 9.6 Thevolumeeffect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 165 9.7 Combiningtheprice-sensitivityandvolumeeffects . . . . . . . . . . . . . 165 9.8 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167 AdditionalExercises . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 168 10 Explicit Price Discrimination 171 10.1 Motivationandobjectives . . . . . . . . . . . . . . . . . . . . . . . . . . . 171 10.2 Requirementsforexplicitpricediscrimination . . . . . . . . . . . . . . . . 172 10.3 Differentpricesfordifferentsegments . . . . . . . . . . . . . . . . . . . . 175 10.4 Wrap-up . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178 11 Implicit Price Discrimination (Screening) 179 11.1 Motivesandobjectives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 11.2 Perfectpricediscriminationwithunitdemand . . . . . . . . . . . . . . . . 180 11.3 Screening: basicframework . . . . . . . . . . . . . . . . . . . . . . . . . . 181 11.4 Differentiatedproductsasscreening . . . . . . . . . . . . . . . . . . . . . 183 11.5 Example: Softwareversioning . . . . . . . . . . . . . . . . . . . . . . . . . 185 11.6 Example: Airlines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 189 11.7 Intertemporalproductdifferentiation . . . . . . . . . . . . . . . . . . . . . 191
Page 1 and 2: Firms, Prices, And Markets Timothy
Page 3: Table of Contents Math Review 1 M.1
Page 7: Table of Contents v 16.5 Comparison
Page 11 and 12: M.1 What math? Math Review Microeco
Page 13 and 14: Section 3 Graphs 3 M.3 Graphs To gr
Page 15 and 16: Section 4 Inverse of a function 5 f
Page 17 and 18: Section 6 Some nonlinear functions
Page 19 and 20: Section 8 Slope of a nonlinear func
Page 21 and 22: Preliminaries Analytic Methods for
Page 23 and 24: Section 2 The economist’s notion
Page 25 and 26: Section 4 Decomposition of decision
Page 27 and 28: Section 5 Marginal analysis 17 Marg
Page 29 and 30: Section 5 Marginal analysis 19 •
Page 31 and 32: Section 6 The mathematics of margin
Page 33 and 34: Section 7 Wrap-up 23 Observe that a
Page 35 and 36: 1.1 Motives and objectives Broadly
Page 37 and 38: Section 3 Valuation, cost, and surp
Page 39 and 40: Section 5 Many buyers and many sell
Page 43 and 44: Section 6 Very many buyers and very
Page 45 and 46: Section 8 Wrap-up 35 1.8 Wrap-up Th
Page 47 and 48: Chapter 2 Supply, Demand, and Marke
Page 51 and 52: Section 4 Demand and supply: Graphi
Page 53 and 54: Section 5 Consumer and producer sur
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Section 6 Gains from trade in equil
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Section7 Changesincostsorvaluations
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Section7 Changesincostsorvaluations
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Section 8 Taxes on transaction 51 s
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Section 9 Wrap-up 53 ation curve (m
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Additional exercises 55 Exercise 2.
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Chapter 3 Consumer Choice and Deman
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Section 3 A model of consumer choic
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Section 4 Interpretation of demand
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Section 4 Interpretation of demand
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Section 5 Wrap-up 65 Linear and log
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Chapter 4 Production and Costs 4.1
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Section 3 What to include in the co
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Section 3 What to include in the co
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Section 4 Economies of scale 73 Sou
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Section 5 A typical cost curve 75 M
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Section 6 When are fixed costs impo
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Section 6 When are fixed costs impo
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Section 7 Pitfalls to avoid regardi
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Section 8 The leading examples of c
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Additional exercises 91 Additional
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94 Competitive Supply and Market Pr
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100 Competitive Supply and Market P
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114 Short-Run Costs and Prices Chap
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Chapter 7 Pricing with Market Power
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Section 3 Profit-maximizing output
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Section 3 Profit-maximizing output
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Section 4 Profit maximization versu
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Section 5 The effect of a long-run
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Additional exercises 145 produces l
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Chapter 8 Elasticity of Demand 8.1
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Section 2 Measuring elasticity 149
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Section 4 Elasticity of special dem
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Section 4 Elasticity of special dem
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Section 6 Wrap-up 155 For example,
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Chapter 9 How Pricing Depends on th
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Section 3 Marginal revenue and elas
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Section 4 The effect of an increase
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Section 5 The price-sensitivity eff
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Section 6 The volume effect 165 Alt
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Section 8 Wrap-up 167 The shift in
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Additional exercises 169 Figure E9.
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172 Explicit Price Discrimination C
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180 Implicit Price Discrimination (
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200 Nonlinear Pricing Chapter 12 On
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202 Nonlinear Pricing Chapter 12 tw
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204 Nonlinear Pricing Chapter 12 fu
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206 Nonlinear Pricing Chapter 12 We
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208 Nonlinear Pricing Chapter 12 Fi
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210 Nonlinear Pricing Chapter 12
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212 Static Games and Nash Equilibri
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230 Imperfect Competition Chapter 1
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Chapter 15 Explicit and Implicit Co
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Section 3 Individual vs. collective
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Section 3 Individual vs. collective
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Section 4 Achieving cooperation thr
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Section 5 Wrap-up 253 of a social n
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256 Strategic Commitment Chapter 16
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Timothy Van Zandt - Insead

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