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Third-degree price discrimination means charging a different price to a group of consumers based on their different elasticities of demand: the less elastic group is charged a higher price. [22] For example, rail and tube (subway) travelers can be subdivided into commuters and casual travelers, and cinema goers can be subdivided into adults and ...
First-degree price discrimination The business charges every consumer exactly how much they are willing to pay for the product. Assume the monopolist determines the price of the product based on the maximum amount of money a consumer is known to pay for any quantity of product that is exactly equal to the demand price for the product in order ...
If the monopoly were permitted to charge individualised prices (this is termed third degree price discrimination), the quantity produced, and the price charged to the marginal customer, would be identical to that of a competitive company, thus eliminating the deadweight loss; however, all gains from trade (social welfare) would accrue to the ...
Example: Standard Oil (1870–1911)Under monopoly, monopoly firms can obtain excess profits through differential prices. According to the degree of price difference, price discrimination can be divided into three levels. [11] Natural monopoly, a monopoly in which economies of scale cause efficiency to increase continuously with the size of the ...
Third-degree price discrimination prices products or services differently based on the unique demographic of different groups. Examples of third-degree price discrimination are student or senior discounts, or discounted travel tickets for last-minute buys. [44]
The Lerner index can be used to measured the degree of monopoly power and monopoly price. In addition, monopoly price will prevent new business from entering the market and restrict innovation. A monopoly would not like to invest more on research and development or innovation due to it already has a captive market.
In United States antitrust law, monopolization is illegal monopoly behavior. The main categories of prohibited behavior include exclusive dealing, price discrimination, refusing to supply an essential facility, product tying and predatory pricing. Monopolization is a federal crime under Section 2 of the Sherman Antitrust Act of 1890.
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