Edexcel Economics: Unit 3 Business Economics and Economic Efficiency (June 2014) EC03

Does anyone know what niche markets has got to do with contestability?

Guys, I'm doing a question right now which says: Using an appropriate diagram, explain how Virgin Media can successfully price discriminate to 'boost profits'. Can someone who is comfortable with this topic tell me what points they would use for it? The more detail you give the better. Thanks

If I were you I wouldn't bother taking the exam

Guys, I'm doing a question right now which says: Using an appropriate diagram, explain how Virgin Media can successfully price discriminate to 'boost profits'. Can someone who is comfortable with this topic tell me what points they would use for it? The more detail you give the better. Thanks

There are 3 types of price discrimination:
1st degree/Perfect price discrimination.
This is when a firm completely knows a consumers preferance and their ability to pay thus varying price with each individual consumer. This practice completely errodes any consumer surplus. However perfect price discrimination requires perfect knowledge of each consumer thus it doesn't exist in the real word.

2nd degree price discrimination:
This is where price varies to the amount of quantity demanded and is also subject to surplus capacity. Examples include bulk buying/selling hotel rooms last minuite at cheaper prices. Firms aren't likely to be making a lot of profit however they're happy to accept a smaller profit margin as they're able to gain an advantage over their rivals.

Third degree price discrimination:
This involves charging different prices for each different market segment. The market is usually segmented by time of geography.

For the question, I'd suggest reading the case study and see if there are any points which relate to price discrimination e.g. time, exports/overseas etc. The diagram I'd draw would be a MR/AR for 1 market with AR being elastic and then another with AR being inelastic. It's explain so doesn't need an evaluation but some evaluations would be profit could be used for R&D thus offsetting the loss in consumer surplus. Another could be that price discrimination can help avoid congestion etc.

Guys, I'm doing a question right now which says: Using an appropriate diagram, explain how Virgin Media can successfully price discriminate to 'boost profits'. Can someone who is comfortable with this topic tell me what points they would use for it? The more detail you give the better. Thanks

Does anyone know which are the factors that determine monopsony power? Or the simplest definition of Law of Diminishing Returns and Game Theory?

There can be different cost associated when the markets are separated if so higher profitability might not be gained.

The magnitude of price discrimination in different market.

Higher price charged may lead to negative brand image.

In the long run there can be arbitrage.

You cannot use cost as an evaluation because it must be provided at the same cost but at different prices. It must remain the 'same good'.

Oh oh. Thanx. Can you suggest me someother evaluvation?

price discrimination- supplying the same product/service yet charging different prices to different groups with different price elasticities of demand.

for price discrimination to occur- must have a degree of price setting power, i.e. a monopolist, and there must be at least two different groups with different PED'S.

in the case of virgin media they could charge more for there services i.e. television when they anticipate a rise in demand for their goods/services.

diagram- cost revenue diagram with high supernormal profits perhaps, although I'm not sure.