A discriminating monopoly is a monopoly firm that charges different prices to different segments of its customer base. ... Price discrimination is only achieved through the firm’s monopoly status to control pricing and production without competition .
What is meant by price discrimination?
What Is Price Discrimination? Price discrimination is a selling strategy that charges customers different prices for the same product or service based on what the seller thinks they can get the customer to agree to . In pure price discrimination, the seller charges each customer the maximum price they will pay.
What is price discrimination in monopoly market?
In monopoly, there is a single seller of a product called monopolist. ... The monopolist often charges different prices from different consumers for the same product. This practice of charging different prices for identical product is called price discrimination.
What is price discrimination example?
An example of price discrimination would be the cost of movie tickets . Prices at one theater are different for children, adults, and seniors. The prices of each ticket can also vary based on the day and chosen show time. Ticket prices also vary depending on the portion of the country as well.
How does price discrimination benefit monopolies?
Companies benefit from price discrimination because it can entice consumers to purchase larger quantities of their products or it can motivate otherwise uninterested consumer groups to purchase products or services.
What companies use price discrimination?
Industries that commonly use price discrimination include the travel industry, pharmaceuticals, leisure and telecom industries . Examples of forms of price discrimination include coupons, age discounts, occupational discounts, retail incentives and gender based pricing.
Is price discrimination profitable?
Price discrimination is profitable only if elasticity of demand in one market is different from elasticity of demand in the other. Therefore, the monopolist will discriminate prices between two markets only when he finds that the price elasticity of demand of his product is different in the different sub-markets.
What are the conditions of price discrimination?
Price discrimination is possible under the following conditions: The seller must have some control over the supply of his product . Such monopoly power is necessary to discriminate the price. The seller should be able to divide the market into at least two sub-markets (or more).
What is the goal of price discrimination?
The goal of price discrimination is for the seller to make the most profit possible and to capture the market’s consumer surplus and generate the most revenue possible for a good sold .
Is price discrimination good or bad?
Price discrimination can provide benefits to consumers, such as potentially lower prices , rewards for choosing less popular services and helps the firm stay profitable and in business. The advantages of price discrimination will be appreciated more by some groups of consumers.
What is an example of price fixing?
Examples of horizontal price-fixing agreements include agreements to adhere to a price schedule or range ; to set minimum or maximum prices; to advertise prices cooperatively or to restrict price advertising; to standardize terms of sale such as credits, markups, trade-ins, rebates, or discounts; and to standardize the ...
What is price discrimination with diagram?
In this case, a firm can discriminate according to the quantity consumed . This is called second-degree price discrimination, and it operates by charging different prices for different quantities or ‘blocks’ of the same good. Different prices are charged for different quantities, or “blocks” of the same good. In Fig.
Which is not a type of price discrimination?
The correct answer is D. Charging the same price to everyone for a good or service is not price discrimination.
What are the disadvantages of price discrimination?
Disadvantages of Price Discrimination
Under price discrimination, some consumers will end up paying higher prices (e.g. people who have to travel at busy times). These higher prices are likely to be allocatively inefficient because P > MC. Decline in consumer surplus .
Is price discrimination illegal?
Stated as a rule, price discrimination becomes unlawful under federal antitrust law only when it threatens to undermine competitive processes in an affected market and otherwise meets the specific criteria of the federal price discrimination statutes (viz., the simultaneous, ongoing sale of the same or similar products ...
Why is price discrimination unfair?
Many people consider price discrimination unfair, but economists argue that in many cases price discrimination is more likely to lead to greater welfare than is the uniform pricing alternative—sometimes for every party in the transaction. ... It concludes that price discrimination is not inherently unfair .
