“ The Economic Way of Thinking ” 12 th Edition

1. “The Economic Way of Thinking”12th Edition Chapter 8: Price Searching（觅价）

2. Chapter Outline • Price Takers and Price Searchers • The Popular Theory of Price Setting • Introducing Ed Sike • The Basic Rule for Maximizing Net Revenue • The Concept of Marginal Revenue • Why Marginal Revenue is Less Than Price • Setting Marginal Revenue to Equal Marginal Cost

3. Chapter Outline • What About Those Empty Seats? • The Price Discriminator’s Dilemma • Some Strategies for Price Discrimination • Ed Sike Finds a Way • Resentment and Rationale • Cost-Plus-Markup Reconsidered

4. Introduction • 只要企业供应额外一个单位产品的边际收益预期超过其边际成本，它就会供应这个额外单位。 • 边际成本和边际收益相等是市场竞争过程的结果，而不是在这个过程之前经济主体行为的假设。 • 这就是净收益最大化过程的逻辑。 • Net Revenue = TR – TC

5. Price Takers（受价者） and Price Searchers（觅价者） • Questions • Does US Steel establish the price for its product? • Does a farmer establish the price for his/her product?

6. Price Takers and Price Searchers • Question • What would happen if a farmer tried to sell his product above the current market price of $3.38 ¾?

7. Won’t sell any Sell all he wants D Sell all he wants Price Takers and Price Searchers P 3.50 3.48 3.46 Q

8. Price Takers and Price Searchers • The farmer is a price taker. • He cannot affect the price • He can sell all he wants at the market price • He will probably not sell any at a price above the market price

9. Price Takers and Price Searchers • Normal Seller • Sells more at a lower price • Sells less at a higher price • These firms are price searchers • They search for the price that is most advantageous to them • They have some market power

10. Price Takers and Price Searchers • Market power • A matter of degree • Inversely related to elasticity of demand • More substitutes – more elastic the demand

11. Price Takers and Price Searchers P Demand curves faced by price searchers Q

12. The Popular Theory of Price Setting • A Popular Belief • Selling price is cost plus markup（成本加成）. • Questions • Why choose 25 versus a 50 percent markup? • Why will a firm vary its percentage markup depending upon various factors? • Why sell below average cost?

13. The Popular Theory of Price Setting Cost-Plus-Markup Theory is obviously inadequate.

14. Introducing Ed Sike • Example. • Ed Sike is a college sophomore（二年级学生） • He sells film tickets to earn spending money • He sets the price for his tickets

15. Introducing Ed Sike Ed’s Costs Per Movie Film rental $1,800 Auditorium rental（礼堂租金）250 Operator（放映员） 50 Ticket takers（售票员） 100 Total $2,200

16. Introducing Ed Sike • Scenario • Ed receives all revenue • Auditorium seats 700 people

17. D Introducing Ed Sike 7 6 5 4 Price Per Ticket 3 2 1 0 100 200 300 400 500 600 700 800 900 Number of Tickets

18. Introducing Ed Sike • Scenario • Ed is expected to earn as much net revenue as possible

19. The Basic Rule for Maximizing Net Revenue • Set the price to sell only those units whose marginal revenue is expected to be greater than marginal costs.

20. The Concept of Marginal Revenue • Marginal revenue is the addition of total revenue from selling one more unit. • Marginal cost is the addition to total cost from selling an additional unit. • Ed’s marginal cost is zero

21. The Concept of Marginal Revenue Ed’s Demand Schedule Quantity Total Net Price Demanded Revenue Revenue $7 300 $2,100 -$100 6 400 2,400 200 5 500 2,500 300 4 600 2,400 200 $3 700 $2,100 -100

22. The Concept of Marginal Revenue • 如何确定净收益最大化的价格？ • 方法一：把每个可能的价格都试验一遍；

23. The Concept of Marginal Revenue • 方法二：确定边际收益等于边际成本时的电影票数量，然后（根据需求曲线）找出可以把这么多电影票卖完的价格。 • 在上述例子中，边际收益=边际成本=0，对应的数量为500张，价格为$5. • Question：Why is profit maximized where marginal revenue equals marginal cost?

24. Why Marginal Revenue is Less Than Price • Marginal Revenue < Price • Why? • In order to increase sales, Ed must lower the price on the additional ticket and the ones that would have been sold at a higher price.

25. Why Marginal Revenueis Less Than Price • Marginal Revenue • The difference between the revenue gained from additional quantity and the revenue lost from lowering price on the previous quantity.

26. A D Why Marginal Revenueis Less Than Price P Lost Gained B Q

27. Additions to net revenue MC MR Subtractions from net revenue Why Marginal Revenueis Less Than Price P Q

28. Why Marginal Revenueis Less Than Price • Questions • What would Ed have to do to sell 550 tickets instead of 500? • How would this impact his marginal revenue? • Is it a correct pricing decision?

29. D MR Why Marginal Revenueis Less Than Price P Q 0 100 200 300 400 500 600 700 800 900

30. Setting Marginal Revenue to Equal Marginal Cost • Question • What would happen if the distributor changed the rental fee from a flat $1,800 to $800.00 + $2/ticket sold?

31. Marginal cost D MR Setting Marginal Revenue to Equal Marginal Cost P 7 What is Ed’s net revenue now? 6 5 4 3 2 1 Q 0 100 200 300 400 500 600 700 800 900

32. What About Those Empty Seats? • Questions • Are seats going to waste? • Why doesn’t Ed lower the price on the empty seats? • 类似情况很普遍

33. The Price Discriminator’s Dilemma（价格歧视者的困境） • Question • When should Ed leave seats empty? • Answer • If the cost of discriminating among potential ticket buyers is greater than the additional revenue gained through discrimination.

34. The Price Discriminator’s Dilemma • Question • What if Ed offered to sell the empty seats for $3 to anyone willing to pay more?

35. Some Strategies for Price Discrimination • Grocery coupons（食品折扣） • Discounts for: • Children • Students • Senior Citizens • Airfare Prices for: • Business traveler • Vacationer

36. P P D D Q Q Some Strategies for Price Discrimination Business Traveler Vacation Traveler

37. Ed Sike Finds a Way • Questions • Could Ed increase revenue by charging different groups of customers different prices? • Should students or teachers pay the higher price?

38. Dfaculty Ds MRfaculty MRs Ed Sike Finds a Way 7 6 5 4 Price Per Ticket 3 2 1 0 100 200 300 400 500 600 700 800 900 Number of Tickets

39. Resentment and Rationale（不满及其合理化） • Firms must justify price discrimination • Conditions necessary for price discrimination: • Distinguish buyers from different price elasticities • Prevent low-price buyers from reselling to high-price buyers • Control resentment

40. Resentment and Rationale • 那些批评一切价格歧视的人应该用更客观的角度来看待这个问题: • 成功的价格歧视当然能增加卖方的财富；但同时也增加了买方的财富或福利（如果没有歧视定价，有些商品就无法提供出来） • 歧视定价可以看作是买卖双方之间的一种协作方式！

41. Cost-Plus-Markup Reconsidered • Price searchers: • Estimate marginal cost and marginal revenue • Determine the appropriate level of output • Set their prices so that they can just manage to sell the output produced.

42. Cost-Plus-Markup Reconsidered • 觅价者任务的复杂性和不确定性使得成本加成理论被当作一种经验法则。

43. Price Takers’ Markets and “Optimal” Resource Allocation • 经济学中有种传统： • 把所有觅价者称为垄断者 • 把买方和卖方都是受价者的市场称为竞争市场（competitive market） • 他们使用“垄断-竞争”这一区分想要强调觅价和受价两种情形下的不同结果，但是受价情形下同样存在竞争。 • “垄断”的传统提法具有误导性！

44. Price Takers’ Markets and “Optimal” Resource Allocation • 经济学家在“竞争市场”（受价者市场）上看到了一个重要优点： • 资源的“最优配置”（“optimal” allocation of resources）！

45. Price Takers’ Markets and “Optimal” Resource Allocation • Let’s look at the demand and supply curves for house painters during a summer. • This will be used to illustrate the advantages of the price takers assumption.

46. Price Takers’ Markets and “Optimal” Resource Allocation • Remember: • Supply curves are marginal opportunity cost curves. • Marginal opportunity cost curves for any individual will slope upward to the right.

47. S= MC D Price Takers’ Markets and “Optimal” Resource Allocation 24 22 20 18 16 Price per Hour 14 12 10 Sometimes called the “optimal allocation of resources” 8 6 4 2 0 0 1 2 3 4 5 6 7 8 9 10 11 Thousands of Hours of House Painting

48. S= MC Gain from trade foregone D Price Takers’ Markets and “Optimal” Resource Allocation 24 22 20 18 16 Price per Hour 14 12 10 8 6 4 2 0 0 1 2 3 4 5 6 7 8 9 10 11 Thousands of Hours of House Painting

49. Price Takers’ Markets and “Optimal” Resource Allocation Prices fixed above marginal cost rule out some mutually advantageous exchange opportunities.

50. Price Takers’ Markets and “Optimal” Resource Allocation • 在传统的经济分析中，受价者市场比觅价者市场具有某种优越性： • In a price takers’ market: No seller can set and keep price above marginal cost • In a price searchers’ market:They can do so.