445 Ch 5

445 Ch 5 - 5.1 Feasibility of Price Discrimination Any...

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5.1 Feasibility of Price Discrimination Any increase in profit must come either from a reduction in consumer surplus, improved  market efficiency, or some combination of the two.  Because a lower price limits the monopolist’s incentives to serve more customers,  textbook monopolies undersupply its product relative to the efficient outcome.  In order to discriminate successfully, a monopolist must be able to identify who is who  on the demand curve and solve the problem of arbitrage.  In the assumption of price discrimination, a monopoly only knows how willingness to pay  for the good in the overall market varies with the quantity of goods sold.  5.2 Third-Degree Price Discrimination or Group Pricing 3 Key features of 3 rd  degree price discrimination 1. some easily observable characteristic such as age, income, geographic  location, or education status which the monopolist can use to group 
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This note was uploaded on 02/23/2012 for the course ECON 445 taught by Professor Mcmanus during the Summer '08 term at UNC.

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445 Ch 5 - 5.1 Feasibility of Price Discrimination Any...

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