Price discrimination Under Monopoly

Price discrimination Under Monopoly

3. In monopoly, there is a single seller of a product calledmonopolist.
The monopolist has control over pricing, demand, and supply decisions,
thus, sets prices in a way, so that maximum profit can be earned.
The monopolist often charges different prices from different consumers
for the same product. This practice of charging different prices for
identical product is called price discrimination.
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4. Personal
On The Basis
Of Use
Geographical
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5. Personal
Referstopricediscriminationwhendifferentprices
arechargedfromdifferentindividuals.Thedifferent
pricesarechargedaccordingtothelevelofincomeof
consumersaswellastheirwillingnesstopurchasea
product.Forexample,adoctorchargesdifferentfees
frompoorandrichpatients.
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6. Geographical
Referstopricediscriminationwhenthe
monopolistchargesdifferentpricesat
differentplacesforthesameproduct.This
typeofdiscriminationisalsocalled
dumping.
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7. On the Basis of Use
Occurswhendifferentpricesarecharged
accordingtotheuseofaproduct.Forinstance,an
electricitysupplyboardchargeslowerratesfor
domesticconsumptionofelectricityandhigher
ratesforcommercialconsumption.
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8. 30
E ATC
80
$120
D
MR
MC
Number of Round-trip Tickets
Dollars per
Ticket
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9. 30
Dollars per
Ticket
120
D
MR
MC
10
$160
Additional profit from
price discrimination
Number of Round-trip Tickets
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10. Number of Round-trip Tickets
Dollars per
Ticket
$120
D
MR
MC
30
100
30
F
G
H
Additional profit from
price discrimination
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11. Referstoapricediscriminationinwhicha
monopolistchargesthemaximumpricethat
eachbuyeriswillingtopay.Thisisalsoknown
asperfectpricediscriminationasitinvolves
maximumexploitationofconsumers.Inthis,
consumersfailtoenjoyanyconsumersurplus.
Firstdegreeispracticedbylawyersanddoctors
First-degree Price Discrimination
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12. Refers to a price discrimination in which
buyers are divided into different groups and
different prices are charged from these groups
depending upon what they are willing to pay.
Railways and airlines practice this type of price
discrimination.
Second-degree Price Discrimination
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13. Refers to a price discrimination in which the
monopolist divides the entire market into
submarkets and different prices are charged in
each submarket. Therefore, third-degree price
discrimination is also termed as market
segmentation
Thired-degree Price Discrimination
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14. Existence of Monopoly
Separate Market
No Contact between
Buyers
Different Elasticity of
Demand
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15. Impliesthatasuppliercandiscriminateprices
onlywhenthereismonopoly.Thedegreeofthe
pricediscriminationdependsuponthedegreeof
monopolyinthemarket.
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16. Impliesthattheremustbetwoormoremarketsthatcan
beeasilyseparatedfordiscriminatingprices.Thebuyer
ofonemarketcannotmovetoanothermarketandgoods
soldinonemarketcannotberesoldinanothermarket.
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17. Referstooneofthemostimportantconditionsforprice
discrimination.Asuppliercandiscriminatepricesif
thereisnocontactbetweenbuyersofdifferentmarkets.
Ifbuyersinonemarketcometoknowthatprices
chargedinanothermarketarelower,theywillpreferto
buyitinothermarketandsellinownmarket.The
monopolistsshouldbeabletoseparatemarketsand
avoidresellinginthesemarkets.
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18. Impliesthattheelasticityofdemandinthemarkets
shoulddifferfromeachother.Inmarketswithhigh
elasticityofdemand,lowpricewillbecharged,whereas
inmarketswithlowelasticityofdemand,highprices
willbecharged.Pricediscriminationfailsincaseof
marketshavingsameelasticity-ofdemand.
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19. i. Helps organizations to earn revenue and
stabilize the business
ii. Facilitates the expansion plans of
organizations as more revenue is generated
iii. Benefits customers, such as senior citizens
and students, by providing them discounts
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20. i. Leads to losses as some consumers end up paying
higher prices
ii. Involves administration costs for separating
markets.
iv. Some Consumers will face higher prices, leading
to allocativeinefficient
and a loss of consumer surplus.
v. There may be administration costs involved in
separating the markets
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21. Thank You !!!