Research paper (3 full pages)Topic: The limits of Price DiscriminationRequirement: No graphs, No...

Question

Research paper (3 full pages)Topic: The limits of Price DiscriminationRequirement: No graphs, No table. Only word.One page work cited includes microeconomic texbook.

Robert · Accepted Answer

1 
 
Introduction 
Monopoly is the discriminatory market form which reduces the consumer surplus due to its 
market power and aims at increasing the producer surplus in the market. There are three forms of 
price discrimination under monopoly which uses different ways to extract maximum consumer 
surplus in the form charging higher price or by reducing the supply of goods in the market so that 
the firm can maintain their dominance in the market.  
First degree price discrimination involves charging different prices for different units of goods 
sold in the market. It leads to transfer of surplus over and above the market price to be paid by 
the consumers to the producer of the good. Therefore, the discriminatory pricing strategy under 
monopoly has certain limits beyond which there will be no extraction of market surplus by the 
producers. 
Similarly, in second form of price discrimination there are discounts and schemes as different 
prices are being charged for varying amount of quantities purchased by the consumers. The 
monopolist would be able to generate higher amount of profits because of more revenue earned 
by selling bulk quantity. In case of third degree price discrimination, the monopolist charges 
different prices from different consumers depending on their willingness to pay. For example, in 
case of airline industry, there are various types of classes such as economy and business class at 
different prices. Consumers pay according to their ability to pay and according to their budget  
(Varian, 2007).
Limits of price discrimination issue 
The key issue in price discrimination lies in determining the impact of such discriminatory 
actions by the monopolists over the market scenario along with their future perspective to sustain 
2 
 
in the market.

Research paper (3 full pages)Topic: The limits of Price DiscriminationRequirement: No graphs, No table. Only word.One page work cited includes microeconomic texbook.

Solution

Answer To This Question Is Available To Download

Related Questions & Answers

Submit New Assignment