Ebook Microeconomics - Global edition (6th edition): Part 2
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Ebook Microeconomics - Global edition (6th edition): Part 2
www.downloadslide.com, Pricing and(J AdvertisingEverything is worth what its purchaser will pay for it. —Publilius Syrus (first century B.c.)CHALLENGE Ebook Microeconomics - Global edition (6th edition): Part 2EMagazine Pricing and Advertisingnonuniform pricing charging consumers different pnees for the same product or charging a single customer a price that depends on the number of units the customer buysTo maximize their profits, magazine publishers use complex pricing schemes and rely onadvertising. Ma Ebook Microeconomics - Global edition (6th edition): Part 2gazines typically charge higher prices at newsstands than to subscribers and Charge some subscribers more than others.Virtually all magazines carry adEbook Microeconomics - Global edition (6th edition): Part 2
s. All else the same, the larger a magazine’s circulation, themore advertisers pay per ad. Consequently, a magazine may drop its subscription price towww.downloadslide.com, Pricing and(J AdvertisingEverything is worth what its purchaser will pay for it. —Publilius Syrus (first century B.c.)CHALLENGE Ebook Microeconomics - Global edition (6th edition): Part 2es.Kaiser and Wright (2006) examined the market for magazine readership and advertising in Germany. They found that advertising ‘subsidizes” the cost to readers. and that magazines make most of their money from advertisers. Moreover, they found that increased demand by magazine readers raises advert Ebook Microeconomics - Global edition (6th edition): Part 2ising rates, but that higher demand by advertisers decreases cover prices.Between World War II and the mid-1990s, total U.S. magazine circulation grewEbook Microeconomics - Global edition (6th edition): Part 2
substantially. The total number of magazines sold remained relatively constant at 360 million copies between 1994 and 2006. A combination of a long-twww.downloadslide.com, Pricing and(J AdvertisingEverything is worth what its purchaser will pay for it. —Publilius Syrus (first century B.c.)CHALLENGE Ebook Microeconomics - Global edition (6th edition): Part 2s to dip to 347 million in 2009. Ad revenue rose from S1S.5 billion in 1999 to $25.6 billion in 2007, fell to $19.4 billion in 2009. before rising 5.7% in the second quarter of 2010 compared to that quarter in 2009.Adjusting subscription prices is the key to increasing sales for most magazines. Over Ebook Microeconomics - Global edition (6th edition): Part 2 time, magazine prices fell and advertising revenue rose (or fell less), so the share of revenue from advertising increased. The percentage of advertiEbook Microeconomics - Global edition (6th edition): Part 2
sing to total consumer magazine revenue rose from 50% in 1996 to 66% in 2009.Why do magazines charge various groups of consumers different prices? Howwww.downloadslide.com, Pricing and(J AdvertisingEverything is worth what its purchaser will pay for it. —Publilius Syrus (first century B.c.)CHALLENGE Ebook Microeconomics - Global edition (6th edition): Part 2) chooses a single price given that it does not advertise. We need to extend this analysis because many price-setting firms set multiple prices and advertise, rhe analysis in this chapter helps to answer many real-world questions: Why docs Disncyworld Florida charge local residents $219 for a onc-wc Ebook Microeconomics - Global edition (6th edition): Part 2ek pass and out-of-towners $234? Why arc airline fares substantially less if you book in advance? Why arc some goods, including computers and softwareEbook Microeconomics - Global edition (6th edition): Part 2
, bundled and sold at a single price?Often, these price-setting firms can use information about individual consumers’ demand curves to increase their www.downloadslide.com, Pricing and(J AdvertisingEverything is worth what its purchaser will pay for it. —Publilius Syrus (first century B.c.)CHALLENGE Ebook Microeconomics - Global edition (6th edition): Part 2 customer a price that depends on the number of units purchased. By replacing a single price with nonuniform pricing, the firm raises its profit.416price discrimination practice in which a firm charges consumers differ exit prices lor the same goodIn this chapter, we examine seven main topicsChallen Ebook Microeconomics - Global edition (6th edition): Part 2ge: Magazine Pricing and Advertising 417Why can a monopoly earn a higher profit from using a nonuniform pricing scheme than from setting a single pricEbook Microeconomics - Global edition (6th edition): Part 2
e? A monopoly that uses nonuniform prices can capture some or all of the consumer surplus and deadweight loss that results if the monopoly sets a singwww.downloadslide.com, Pricing and(J AdvertisingEverything is worth what its purchaser will pay for it. —Publilius Syrus (first century B.c.)CHALLENGE Ebook Microeconomics - Global edition (6th edition): Part 2mers retain some consumer surplus. The monopoly loses sales to other customers who value the good less than the single price. These lost sales arc a deadweight loss: the value of these potential sales in excess of the cost of producing the good. A monopoly that uses nommilorm pricing captures additi Ebook Microeconomics - Global edition (6th edition): Part 2onal consumer surplus by raising the price to customers who value the good the most. By lowering its price to other customers, the monopoly makes addiEbook Microeconomics - Global edition (6th edition): Part 2
tional sales, thereby changing what would otherwise be deadweight loss into profit.We examine several types of nonuniform pricing including price discwww.downloadslide.com, Pricing and(J AdvertisingEverything is worth what its purchaser will pay for it. —Publilius Syrus (first century B.c.)CHALLENGE Ebook Microeconomics - Global edition (6th edition): Part 2fferent prices for the same good based on individual characteristics ol consumers, membership in an identifiable subgroup of consumers, or on the quantity purchased by the consumers. Many magazines price discriminate by charging college students less for subscriptions than they charge older adults. Ebook Microeconomics - Global edition (6th edition): Part 2II a magazine were to start setting a high price for everyone, many college student subscribers—who are sensitive to price increases (have relativelyEbook Microeconomics - Global edition (6th edition): Part 2
elastic demands)—would cancel their subscriptions. II the magazine were to let everyone buy ar the college student price, it would gain few additionalwww.downloadslide.com, Pricing and(J AdvertisingEverything is worth what its purchaser will pay for it. —Publilius Syrus (first century B.c.)CHALLENGE Ebook Microeconomics - Global edition (6th edition): Part 2 who are willing to pay the higher price. Thus, the magazine makes more profit by price discriminating.Some noncompetitive firms that cannot practically price discriminate use other forms of nonuniform pricing to increase profits. One method is for a firm to charge a two-part tariff, whereby a custo Ebook Microeconomics - Global edition (6th edition): Part 2mer pays one fee for the right to buy the good and another price for each unit purchased. Health chib members pay an annual fee to join the club and tEbook Microeconomics - Global edition (6th edition): Part 2
hen shell out an additional amount each lime they use the facilities.Another type of nonlinear pricing is 3 lie-in sale, whereby a customer may buy onwww.downloadslide.com, Pricing and(J AdvertisingEverything is worth what its purchaser will pay for it. —Publilius Syrus (first century B.c.)CHALLENGE Ebook Microeconomics - Global edition (6th edition): Part 2aurants provide only full-course dinners: a single price buys an appetizer, a main dish, and a dessert. A firm may sell copiers under the condition that customers agree to buy all future copier service and supplies from it.A monopoly may also increase its profit by advertising. A monopoly may advert Ebook Microeconomics - Global edition (6th edition): Part 2ise to shift Its demand curve so as to raise its profit, taking into account the cost of advertising.1Why and How Firms Price Discriminate. A film canEbook Microeconomics - Global edition (6th edition): Part 2
increase its profit by price discriminating if it has markot power, can identify which customers are more price sensitive than others, and can prevenwww.downloadslide.com, Pricing and(J AdvertisingEverything is worth what its purchaser will pay for it. —Publilius Syrus (first century B.c.)CHALLENGE Ebook Microeconomics - Global edition (6th edition): Part 2stomer is willing to pay for each unit of output, the monopoly captures all potential consumer surplus. and the efficient (competitive) level of output IS sold.3Quantity Discrimination. Some firms profit by charging different pnees for large purchases than for small ones, which is a form of price di Ebook Microeconomics - Global edition (6th edition): Part 2senmination.www.downloadslide.com418 CHAPTER 12 Pricing and Advertising4Multimarket Price Discrimination. Firms that cannot perfectly price discnminatEbook Microeconomics - Global edition (6th edition): Part 2
e may charge a group of consumers With relatively elastic demands a lower price than other groups of consumers.5Two-Part Tariffs. By charging consumerwww.downloadslide.com, Pricing and(J AdvertisingEverything is worth what its purchaser will pay for it. —Publilius Syrus (first century B.c.)CHALLENGE Ebook Microeconomics - Global edition (6th edition): Part 2-In Sales. By requiring a customer Io buy a second good or service along with the first, firms make higher profits than they do by selling the goods or services separately.7Advertising. A monopoly advertises to shift its demand curve and to increase its profit. Ebook Microeconomics - Global edition (6th edition): Part 2www.downloadslide.com, Pricing and(J AdvertisingEverything is worth what its purchaser will pay for it. —Publilius Syrus (first century B.c.)CHALLENGEGọi ngay
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