Examples of Price Discrimination Rebates & Coupons Priceline.com (tickets non-transferable) Sequential releases of movies (Theaters, DVD, Cable, air TV).

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Presentation transcript:

Examples of Price Discrimination Rebates & Coupons Priceline.com (tickets non-transferable) Sequential releases of movies (Theaters, DVD, Cable, air TV).

First Degree Price Discrimination MC D MR P* $ Q First Degree Price Discrimination from a welfare point of view. Is it efficient? Is everybody better off?

To price discriminate the monopolist must be able to prevent resale. To practice first degree price discrimination requires more information than any real firm has.

Price Discrimination A Monopolist in Two Markets Third Degree Price Discrimination MR MRc MRa Pa Pc Da Dc QaQcQa+Qc MC QaQc

MR MRc MRa P0 P1

Elasticities and Price Discrimination MR a =Pa(1-1/|h a |)= Pc(1-1/|h c |)=MR c If hc>ha then Pc<Pa The group with a more elastic demand is charged a lower price. The monopolist charges lower prices to price sensitive consumers

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