Econ501aL18 - Price Discrimination Price discrimination...

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Price Discrimination Price discrimination occurs when a ¯rm takes advan- tage of its market power to sell the same product in two di®erent markets at two di®erent prices. A mo- nopolist can make more pro¯ts by price discriminating than by charging the same price in both markets. For example, discounts for students or seniors. The discounts are not just to be nice, but to increase prof- its by charging everyone what they are willing to pay. For example, selling at di®erent locations, such as the
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Example: market 1 is the (lower demand) US market, and market 2 is the Japanese market. TC = 3000 + 20 x = 3000 + 20( x 1 + x 2 ) : Demand functions for the two markets are x 1 =8 0 ¡ p x 1 x 2 =1 2 0 ¡ p x 2 : To ¯nd the total and marginal revenue functions, we so lvefo rtheinversedemand : p x 1 =8 0 ¡ x 1 TR 1 =( 8 0 ¡ x 1 ) x 1 MR 1 =8 0 ¡ 2 x 1 p x 2 =1 2 0 ¡ x 2 TR 2 =( 1 2 0 ¡ x 2 ) x 2 MR 2 =1 2 0 ¡
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Econ501aL18 - Price Discrimination Price discrimination...

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