Mod 63 - Summary and Review - Price Discrimination

What is a monopolist who charges all customers one price called?

A single-price monopolist.

What are common methods of price discrimination?

Advance purchase restrictions AND Volume discounts AND Two-part tariffs

Is there a deadweight loss to society under perfect price discrimination? Why or why not?

No, because the entire total surplus that would exist under perfect competition is converted into profit for the monopoly.

What is the effect of perfect price discrimination on consumer surplus and monopolist's profit?

Perfect price discrimination converts the entire consumer surplus into producer surplus (or monopolist's profit).

Why would a firm engage in price discrimination?

To increase profit. At the market equilibrium, some consumers are willing to pay more but don't have to; others would buy if the price were lower. Price discrimination allows firms to charge more to those willing to pay more and charge less to those would only buy it at a lower price.

What is price discrimination?

When a firm charges different prices to different customers for the same product.

What is perfect price discrimination?

When a monopolist charges ever customer their exact maximum willingness to pay.