Monopoly - Price Discrimination and elasticity - perfect price discrimination
10 important questions on Monopoly - Price Discrimination and elasticity - perfect price discrimination
2 disticnt feature of price discrimination when it comes to marginal cost?
- The greater the number of prices the monopolist charges the lower the lowest price. Some consumers will pay as low as marginal cost
- the grater the number of prices the monopoly charges the more money it extracts from the consumers
What are the three common techniques for price discrimination?
- Advance purchase restriction
- volume discount
- two part tariffs
What do we call it when the customer plans to consume alot of a good? what is the cost of the last unit? And which group does this seprate?
the cost of the last unit, the marginal cost to the consumer is considerably less than the average price
this separates those who plan to buy alot and so are likely to be more sensitive to price from those who dont
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What are volume discounts and advanced purchases an example of? And why?
- Second degree price discrimination
- because the monopolist knows it has different groups of customers but is unable to differentiate them easily.
What happens when sales to consumers formerly prices out of the market get lower price?
What do we call it when a customer pays a flat fee upfront, and then a per-unit fee one each item purchase
What is an example of price discrimination that creates serious concerns is is prohibited?
According to perfect price discriminations what happens to those who are willing to well the least? Does this cause inefficiency from economic POV? Why?
- Those least willing to buy the good will pay marginal cost
- no it does not cause any efficiency
- because all potential consumers who are willing to purchase the good at a price equal to or above the marginal cost are able to do so
What do we call it when prices are lower for those who purchase well in advance? And which group does this separate?
this separates those who are likely to shop for better prices from those who won't
Why does government policies on monopoly typically focus on preventing deadweight losses not preventing price discrimination?
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