l12 - EC 1 UCLA Dr. Bresnock Lecture 12 Pure Monopoly:...

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EC 1 UCLA Dr. Bresnock Lecture 12 Pure Monopoly : Price and Output Determination -- Price Discrimination Price discrimination occurs when the same product is sold at different prices when the costs of producing the product are the same. Conditions for Price Discrimination (1) Monopoly Power -- the seller must be a monopolist or have some degree of monopoly control over price. (2) Market Segregation -- the seller must be able to divide the market into different classes or groups. This may be done by differences in willingness to pay, demand elasticities, tastes and preferences, or perhaps incomes. (3) No Resale -- from one buyer to another. Examples = telephone rates -- daytime vs weekend rates; movie theaters -- nighttime vs. matinee ticket prices; resorts -- on-season vs off-season hotel room rates; regular vs. “early bird” dinner prices; business class vs economy airline charges, designer vs. no-brand jeans, etc. Perfect Price Discrimination -- seller extracts the maximum willingness to pay from each customer. Thus, the seller views P as equal to MR . (Note: This example uses the same Q and P schedules as the previous example for the non-price discriminating monopolist to allow ease of comparison between the two cases.) (1) Q (2) P = AR = MR (3) TR (4) TC (5) MC (6) ATC (7) Eco. Profit or Loss 0 $15 1 $26 35 2 24 50 3 22 60 4 20 65 5 18 75 6 16 90 7 14 110
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l12 - EC 1 UCLA Dr. Bresnock Lecture 12 Pure Monopoly:...

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