// LabPriceDiscrimSpecs.swift. 11/22/2020. import Foundation class LabPriceDiscrimSpecs { let strPriceDiscrimSpecs :String = """ `` Lab Specs // Demand function slider specs 200 400 50 300 // 0: Firm A constant -4.0 -2.0 .5 -2.00 // 1; Firm A price coefficient 200 400 50 400 // 2: Firm B constant -4.0 -2.0 .5 -2.00 // 3; Firm B price coefficient // Quantity slider specs 0 325 10 50 // 4: Firm A quantity 0 325 10 50 // 5: Firm B quantity // Price slider specs 0 200 5 100 // 6: Firm A price // Cost slider specs 0 2000 500 0 // 7: Fixed costs 20 150 10 50 // 8: Linear costs 0.00 0.25 0.05 0.00 // 9: Quadratic costs `` Prob Specs ` Problem 0 Start Screen 1 - No Price Discrimination: Setting the Stage // 0: Title None // 1: Type of discrimination: None First SecondOpt SecondOi Third // Slider visibility L L B // 2: Type A demand function: Constant, price coef, quantity L L N // 3: Type B demand function: Constant, price coef, quantity N L N // 4: Cost function: Fixed, linear, quadratic // Checkbox demand curve visibility - For illustrate individual demand curves T // 5: TypeA TypeB Sum // Results visibility F F F F // 6: Type A: Rev/Cost/Profit, ConsSur, DWL, second degree F F F F // 7: Type B: Rev/Cost/Profit, ConsSur, DWL, second degree F F F F F // 8: Sums: Rev/Cost/Profit, ConsSur, ProdSur, TotalSur, DWL // Graph visibility T F // 9: Type A, type B // Graph specs 0 0 700 200 // 10: Type A graph Q P,_MR,_MC // 11: Type A axis labels 0 0 350 200 // 12: Type B graph QB P,_MRB,_MC // 13: Type B axis labels // Graph area checkbox visibility F F F F F // 14: Rev/Cost/Profit, ConsSur, ProdSur, TotalSur, DWL ` Text Start // 15: Text `RED`BLDObjective:`BLD Illustrate the demand curves of the two types of consumers and their combined demand curve.`BLK There are two types of consumers: A and B. The demand curve of type A consumers is illustrated on the graphs. Selected the type B checkbox to illustrate the type B's demand curve. Now, illustrate the combined demand curve of types A and B by selecting the Sum checkbox. The horizontal sum of the two consumer types appears on the screen. `BLDQuestion:`BLD Why is there a kink in the combined demand curve at a price of $150? ` Prob 0 End ` Problem 1 Start Screen 2 - No Price Discrimination: Profit Maximization // 0: Title None // 1: Type of discrimination: First, SecondOpt, SecondOi, Third // Slider visibility L L B // 2: Type A demand function: Constant, price coef, quantity L L N // 3: Type B demand function: Constant, price coef, quantity N L N // 4: Cost function: Fixed, linear, quadratic // Checkbox demand curve visibility - For illustrate individual demand curves F // 5: TypeA TypeB Sum // Results visibility T F F F // 6: Type A: Rev/Cost/Profit, ConsSur, DWL, second degree T F F F // 7: Type B: Rev/Cost/Profit, ConsSur, DWL, second degree T F F F F // 8: Sums: Rev/Cost/Profit, ConsSur, ProdSur, TotalSur, DWL // Graph visibility T F // 9: Type A, type B // Graph specs 0 0 700 200 // 10: Type A graph Q P,_MR,_MC // 11: Type A axis labels 0 0 350 200 // 12: Type B graph QB P,_MRB,_MC // 13: Type B axis labels // Graph area checkbox visibility T F F F F // 14: Rev/Cost/Profit, ConsSur, ProdSur, TotalSur, DWL ` Text Start // 15: Text `RED`BLDObjective:`BLD Illustrate the monopoly's profit maximizing solution when it does not discriminate between the consumer types. The monopolist must offer the same price to each consumer type.`BLK A new scrollbar appears on the screen which allows you to adjust the quantity of output produced by the monopoly. Also, the total revenue, total cost, and profit generated by each consumer type and their sums are reported. Type A buyer information on the left, Type B information on the right and the sums in the middle. Since the monopoly cannot discriminate, the combined demand curve is relevant. The marginal revenue curve appears below the demand curve. Adjust the quantity scrollbar to find the profit maximizing quantity of output when no price discrimination exists. Illustrate total revenue, total cost, and profit areas on the graph by selecting the various checkboxes. ` Prob 1 End ` Problem 2 Start Screen 3 - No Price Discrimination: Welfare Implications // 0: Title None // 1: Type of discrimination: First, SecondOpt, SecondOi, Third // Slider visibility L L B // 2: Type A demand function: Constant, price coef, quantity L L N // 3: Type B demand function: Constant, price coef, quantity N L N // 4: Cost function: Fixed, linear, quadratic // Checkbox demand curve visibility - For illustrate individual demand curves F // 5: TypeA TypeB Sum // Results visibility T T T F // 6: Type A: Profit, CS, DWL, second degree T T T F // 7: Type B: Profit, CS, DWL, second degree T T T T T // 8: Sums: Profit, ConsSur, ProdSur, TotalSur, DWL // Graph visibility T F // 9: Type A, type B // Graph specs 0 0 700 200 // 10: Type A graph Q P,_MR,_MC // 11: Type A axis labels 0 0 350 200 // 12: Type B graph QB P,_MRB,_MC // 13: Type B axis labels // Graph area checkbox visibility T T T T T // 14: Revenue, cost, profit CS, DWL ` Text Start // 15: Text `RED`BLDObjective:`BLD Illustrate the welfare implications of no price discrimination.`BLK Surplus information now appears on the screen. Observe how the surpluses change as you adjust the quantity scrollbar. Illustrate the changes on the graph by selecting the various surplus checkboxes. Familiarize yourself with these new checkboxes by selecting them. Select the dead weight loss (DWL) checkbox. `BLDQuestion:`BLD Is the firm's profit maximizing quantity efficient? Explain. `BLDQuestion:`BLD What is the efficient quantity? Explain. ` Prob End ` Problem 3 Start Screen 4 - First Degree Price Discrimination // 0: Title First // 1: Type of discrimination: First, SecondOpt, SecondOi, Third // Slider visibility L L B // 2: Type A demand function: Constant, price coef, quantity L L B // 3: Type B demand function: Constant, price coef, quantity N L N // 4: Cost function: Fixed, linear, quadratic // Checkbox demand curve visibility - For illustrate individual demand curves F // 5: TypeA TypeB Sum // Results visibility T T T F // 6: Type A: Profit, CS, DWL, second degree T T T F // 7: Type B: Profit, CS, DWL, second degree T T T T T // 8: Sums: Profit, ConsSur, ProdSur, TotalSur, DWL // Graph visibility T T // 9: Type A, type B // Graph specs 0 0 350 200 // 10: Type A graph QA P,_MRA,_MC // 11: Type A axis labels 0 0 350 200 // 12: Type B graph QB P,_MRB,_MC // 13: Type B axis labels // Graph area checkbox visibility T T T T T // 14: Revenue, cost, profit CS, DWL ` Text Start // 15: Text `RED`BLDObjective:`BLD Illustrate that while first degree price discrimination leads to efficiency, all the surplus is reaped by the monopoly firm.`BLK The monopoly firm can now discriminate between the two types of buyers. Consequently, two graphs and two quantity scrollbars now appear on the screen, one for type A buyers and one for type B. Furthermore, the monopoly firm can now price discriminate perfectly. That is, the firm can parse out one unit of the good at a time charging the most it can to sell each unit. Select the revenue (Rev) checkbox. `BLDQuestion:`BLD Why does the total revenue equal the entire areas beneath the demand curve? Check the profit (Profit) checkbox and focus on Type A buyers. Adjust the scrollbar to find the quantity of output sold to Type A buyers that maximizes the firm's profits. Next, turn to type B buyers. Find the profit maximizing quantity for Type B buyers. `BLDQuestion:`BLD Does efficiency result when the firm is producing the profit maximizing quantity for both types of consumers? Check the total surplus sum (Total Sur) checkbox located at the bottom left of the screen and vary the buyer A and B quantities to illustrate this. ` Prob End ` Problem 4 Start Screen 5 - Third Degree Price Discrimination // 0: Title Third // 1: Type of discrimination: First, SecondOpt, SecondOi, Third // Slider visibility L L B // 2: Type A demand function: Constant, price coef, quantity L L B // 3: Type B demand function: Constant, price coef, quantity N L N // 4: Cost function: Fixed, linear, quadratic // Checkbox demand curve visibility - For illustrate individual demand curves F // 5: TypeA TypeB Sum // Results visibility T T T F // 6: Type A: Profit, CS, DWL, second degree T T T F // 7: Type B: Profit, CS, DWL, second degree T T T T T // 8: Sums: Profit, ConsSur, ProdSur, TotalSur, DWL // Graph visibility T T // 9: Type A, type B // Graph specs 0 0 350 200 // 10: Type A graph QA P,_MRA,_MC // 11: Type A axis labels 0 0 350 200 // 12: Type B graph QB P,_MRB,_MC // 13: Type B axis labels // Graph area checkbox visibility T T T T T // 14: Revenue, cost, profit CS, DWL ` Text Start // 15: Text `RED`BLDObjective:`BLD Illustrate the profit maximizing solution for third degree price discrimination.`BLK The monopoly firm cannot parse out the good one unit at a time, but it still can discriminate between the two types of buyers. It can charge type A buyers one price and type B buyers another. Begin by focusing on Type A consumers. Adjust the scrollbar for Type A buyers to find the quantity of output sold to Type A consumers that maximizes the firms profits. Next, turn to type B consumers. Find the profit maximizing quantity for Type B buyers. `BLDQuestion:`BLD Does third degree price discrimination result in efficiency when the firm maximizes profit? Select the dead weight loss (DWL) checkbox to explain this. ` Prob End ` Problem 5 Start Screen 6 - Second Degree Price Discrimination // 0: Title SecondOpt // 1: Type of discrimination: First, SecondOpt, SecondOi, Third // Slider visibility L L N // 2: Type A demand function: Constant, price coef, quantity L L N // 3: Type B demand function: Constant, price coef, quantity N L N // 4: Cost function: Fixed, linear, quadratic // Checkbox demand curve visibility - For illustrate individual demand curves F // 5: TypeA TypeB Sum // Results visibility T T T T // 6: Type A: Profit, CS, DWL, second degree T T T T // 7: Type B: Profit, CS, DWL, second degree T T T T T // 8: Sums: Profit, ConsSur, ProdSur, TotalSur, DWL // Graph visibility T T // 9: Type A, type B // Graph specs 0 0 350 200 // 10: Type A graph QA P,_MRA,_MC // 11: Type A axis labels 0 0 350 200 // 12: Type B graph QB P,_MRB,_MC // 13: Type B axis labels // Graph area checkbox visibility T T T T T // 14: Revenue, cost, profit CS, DWL ` Text Start // 15: Text `RED`BLDObjective:`BLD Illustrate second degree price discrimination. That is, analyze the scenario when the monopoly firm can charge buyers an entry fee to have the opportunity of purchasing the good and then charge a price for each unit purchased.`BLK First, note that the quantity scrollbars beneath the graph have disappeared. The firm can no longer divide the buyers into two groups. It now charges both types the same fee and both types the same price. Second, note that a new scrollbar has appeared, the vertical scrollbar located between the two graphs. This scrollbar allows you to adjust the price. Initially, the price equals firm's marginal cost, $50, and the firm charges a fee of $10,000. This is called the Oi solution. `BLDQuestion:`BLD Is the Oi solution efficient? Explain. `BLDQuestion:`BLD Question: Why doesn't the firm charge a higher fee? Hint: What does the consumer surplus of type A buyers equal at the Oi solution. If the firm charged a higher fee, how would type A buyers respond? Critical point: A consumer would not purchase the good if the purchase resulted in a negative consumer surplus. `BLDQuestion:`BLD Question: Is the Oi solution the best the monopolist can do? To answer this question focus on the vertical price scrollbar located between the graphs. Increase the price by $10. `BLDQuestion:`BLD What happens to the firm's profit? `BLDQuestion:`BLD Does the firm can increase its profit by deviating from the Oi solution. Now, look more closely at the price and fee. The firm has charged a higher price, $60 rather than $50, but it has reduced the fee from $10,000 to $8,100. `BLDQuestion:`BLD Why has the firm reduced the fee? Gradually increase the price while keeping your eyes on the sum or the firm's profit. `BLDQuestion:`BLD What price and fee maximize the firm's profit? This is called the optimal tariff solution. `BLDQuestion:`BLD Is the optimal tariff solution efficient? Explain. ` Prob End """ }