DISCRIMINATING MONOPOLY PRESENTATION ON DISCRIMINATING MONOPOLY BY SHAHBANO PARVEEN Associate Professor in Economics, P.G. Govt. College, Sector-11,Chandigarh

DISCRIMINATING MONOPOLY A situation of market in which there is a single seller of a product with no close substitutes and there are barriers to entry and producer is price maker DISCRIMINATING MONOPOLY A monopolist often charges different prices of the same product from different consumers

DEFINITIONS Koutsoyiannis, “Price discrimination exists when the same product is sold at different prices to different buyers”. Mrs. Joan Robinson, “The act of selling the same article produced under single control at a different price is known as price discrimination”.

KINDS OF DISCRIMINATING MONOPOLY 1. Personal Price Discrimination When a monopolist charges different prices from different customers for the same product. 2. Geographical Price discrimination When a monopolist charges different prices in different areas for the same product. 3.Price discrimination according to use: When a monopolist charges different prices for different uses of a product.

WHEN IS PRICE DISCRIMINATION POSSIBLE? Existence of Monopoly Separate Market Difference in the Elasticity of Demand Expenditure in dividing and sub dividing market to be minimum Commodity to order Legal Sanction Product differentiation Behaviour of the Consumers

PRICE AND OUTPUT DETERMIANTION UNDER DICRIMINATING MONOPOLY Each discriminating monopolist, in order to maximize his profit, will produce upto that level where his marginal revenue is equal to marginal cost. Discriminating monopolist is to decide about 1. The total output to produce 2. How much of the output to be sold in different markets and at what price, so as to get maximum profit.

CONDITIONS Monopolist must get same marginal revenue in both markets: The marginal revenue of both the markets must be the same i.e. MR1=MR2 2. Equality between MR and MC: Condition of maximum profit or equilibrium is that marginal revenue earned in each market should be equal to the marginal cost of the total output MR1 = MR2 = MC

If Monopolist produces OQ output than: Marginal cost of total output equal to combined marginal revenue. Marginal revenue of both markets is equal Marginal revenue of both markets is equal to marginal cost of total output

EFFECTS OF PRICE DISCRIMINATION Beneficial Effects. - Beneficial to the Poor - Public Utility Services - Full Utilization of Resources Harmful Effects - No Proper Use of Factors of Production - Less Production Thanks