21/01/2020 Tuesday 15:00-16:00
Notes
Lecture 2 – Monopoly, Price Discrimination
Overview
- Can market forces correct for market power of a monopolist?
- What should government intervention be?
- Monopolies and Price Discrimination: a way to extract more consumer surplus
- Two-part tariff pricing scheme – working through an example
- What are the welfare effects of price discrimination
Standard definition of price discrimination is to sell a product while charging different prices to different consumers. However, an application of price discrimination could be first class or business class seats on an airplane or hardcover and paperback books, where the price is corrected for the cost that is associated with the product differentiation. Using price discrimination, a monopolist may be able to increase profits without a further decrease in social welfare by charging price inelastic consumers (business people) more than price elastic consumers (students).
Can market forces alone reduce market power?
Coase (1972) Durable goods monopolist. See example in textbook. The durability of
The monopolist charges P=MC. Is there a way to restore market power?
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