8.6: Concluding Comments
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Through this chapter you have learned about several pricing schemes that are commonly used to convert would-be consumer surplus into higher profits. The content of this chapter is a natural extension to the material presented in Chapter 7 and represents extensions wherein discriminatory pricing strategies may bring about outcomes that are superior, from the firms perspective, to monopoly pricing. Importantly, some of these schemes could result in outcomes that are socially superior as well. In particular, if a firm is able to perfectly price discriminate, all consumer surplus is converted to profit, but the allocation of resources is efficient and the economy avoids the dead-weight loss to occurs under monopoly pricing. The issue is the distribution of value from a transaction between buyer and seller. As you complete problems sets 1 and 2 below, note that consumer surplus that would have accrued to buyers under the competitive outcome simply gets transformed into profits when the seller is able to perfectly price discriminate.