Question

Consider the case of a monopoly with zero marginal cost meeting two consumers with linear, decreasing individual demand functions. Taking the viewpoint of total welfare (the sum of consumer surplus and producer surplus), is price discrimination involving each consumer facing a different price a good thing? Does it depend on the two demand functions?

Answer 1

No , Price discrimination involving each consumers facing a different price is not good thing.

As Price discrimination is a microeconomic pricing strategy where identical or similar goods and services are sold at different price the same seller in different markets. Price discrimination is very different from substantial difference inn production cost for the different price for the different products cost for every priced product in the later strategy . Price differentiation essentially depends on the variation in the customers ‘s willingness to pay and in the elasticity of their demand .Price discrimination ,very differently ,relies on monopoly power including market share ,product uniqueness ,sole pricing power ,etc. The different price charged with different buyer for the same quality and quantity of product but you can also say combination of price differentiation and product differentiation .,We can also call it equity pricing, preferential pricing, dual pricing and tired pricing.

Yes, it depends upon two demand function because Price differentiation essentially relies on the variation in the customer’s willingness to pay and in the elasticity of their demand.

Price discrimination totally depends on monopoly power, including market share ,product’s different nature , sole pricing power.

Price discrimination is a microeconomic pricing strategy where identical or largely similar goods and services are transacted at different prices by the same provider in different markets.