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

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    Does anyone know what niche markets has got to do with contestability?
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    loss leadership pricing is when, for example, a supermarket will stock a brand that doesn't sell well but stock it anyway to prevent consumers from going to other supermarkets. Loss leaders are products that are stocked simply to retain market share despite making a loss.
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    (Original post by Livaren)
    Does anyone know what niche markets has got to do with contestability?
    If you get a very broad market like the technology market which came up in jan 14 and you say that it's not contestable, for evaluation you can say that however some sub(niche) markets may be contestable because they can appeal to a specific group of consumers by producing a unique good or service. in this case for example, you can say the market for most technological products isn't contestable but the market for creating gaming apps is contestable.
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    hello everyone
    when asked to use game theory in your answer, do you have to change the figures to make them related to the extract given? and in the case of prisoners dilemma is it okay to use random numbers, as long as they show the benefits of both confessing/denying?
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    Contrary to my name, I'm going to get 80UMS since this paper is out of 80UMS.
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    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
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    (Original post by aminkaram)
    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
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    (Original post by 100UMS)
    If I were you I wouldn't bother taking the exam
    Why?
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    (Original post by aminkaram)
    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.
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    (Original post by Dilzo999)
    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.
    I actually read the mark shceme and now I find it a very easy question!
    They give you 4 marks for a full diagram 1 mark for a definition and up to 3 marks for each condition of price discrimination in context. And for evaluation you can say that the conditions may change over time or that arbitrage is possible. so I wouldn't mind seeing something like that in the exam for a 12 marker.
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    Not necessarily just high sunk cost also long run average cost are to big to be able to exploit
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    Does anyone know which are the factors that determine monopsony power? Or the simplest definition of Law of Diminishing Returns and Game Theory?
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    How would you evaluate price discrimination?
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    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.
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    (Original post by aminkaram)
    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
    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.
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    (Original post by areddishherring)
    Does anyone know which are the factors that determine monopsony power? Or the simplest definition of Law of Diminishing Returns and Game Theory?
    youtube helps massively
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    (Original post by shankpink)
    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'.
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    (Original post by areddishherring)
    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?
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    (Original post by shankpink)
    Oh oh. Thanx. Can you suggest me someother evaluvation?
    It is assumed only monopolists have the ability to price discriminate. Therefore, price discrimination may attract unwanted scrutiny from regulators. This could lead to an investigation and a hefty fine if authorities find the firm exploiting consumers with excess prices. It may not be worth it because the Enterprise Act 2002 allows regulators to fine firms up to 10% of profits for three years. This is particularly true with necessities and very price inelastic demand.

    I don't think this is perfect, would appreciate any feedback!
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    (Original post by joelharniman)
    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.
    No you neeed to draw the price discrimination diagrams!
 
 
 
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