1 / 17

Spatial Pricing Decisions

Spatial Pricing Decisions. Chapter 6. Transport costs and distance. Delivered price (mill price + transport costs): changes with distance Uniform delivered pricing: all consumers pay the same price regardless of location. Post stamp “free delivery” Spatial price discrimination.

axl
Télécharger la présentation

Spatial Pricing Decisions

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Spatial Pricing Decisions Chapter 6 1

  2. Transport costs and distance • Delivered price (mill price + transport costs): changes with distance • Uniform delivered pricing: all consumers pay the same price regardless of location. • Post stamp • “free delivery” • Spatial price discrimination 2

  3. Price discrimination • Firm sells product at different prices to different people when cost differences do not exist. • Student discounts • Senior discounts 3

  4. Spatial price discrimination • Spatial price discrimination—customers do not pay the full (delivered) price to get their product. • Firms deliver it themselves or offer free delivery 4

  5. To price discriminate • Firm must have some control over price • Different markets must have different price elasticities • Customers of each market must be separable and easily identifiable • Administrative costs of charging different prices must be less than potential gain • Arbitrage cannot be possible or profitable 5

  6. Figure 6-1 6

  7. Spatial Price Discrimination • Some amount of freight cost is absorbed by the firm • Any spatial pricing other than f.o.b. mill pricing is discriminatory • Lower prices for consumers with more elastic demand (those farther away) 7

  8. Perfect discriminatory spatial pricing • Each market is charged a different price based on distance from store and local competition • Nearby customers subsidize those farther from the store • May be linear price distance function, but that is not necessary. • Expensive to administer 8

  9. Perfect discriminatory spatial pricing vs. f.o.b. mill pricing 9

  10. Uniform delivered pricing • Firm provides the good to all consumers at the same price. “Free delivery” • Nearby customers subsidize those farther from the store. • Simple to administer • Antitrust authorities tolerate uniform delivered pricing: it is supposedly “more fair” than discriminatory spatial pricing. 10

  11. Uniform delivered pricing vs. f.o.b. mill pricing 11

  12. Zonal pricing • All customers in a given region pay the same price. • e.g., USPS uses 8 zones. 12

  13. Zonal pricing, spatial price discrimination and f.o.b. mill pricing 13

  14. Basing point pricing • All output is priced as if it were sold from Location A, regardless of the place of origin. • In U.S.: Steel, plywood, milk (kind of) • In Europe: Steel • Result: The South took longer (and more money) to economically develop. 14

  15. Basing-point pricing 15

  16. Welfare analysis • f.o.b. mill pricing is similar to perfect competition and provides the largest amount of consumer + producer surplus 16

  17. Producer and consumer surplus 17

More Related