Price Discrimination

Price discrimination

First-degree price discrimination

First-degree price discrimination
P

P1

D
Q

O

200

First-degree price discrimination
P

P1

D
Q

O

200

Price discrimination

Third-degree price discrimination

Third-degree price discrimination
P

Revenue from a single price

P1

D
Q

O

200

Third-degree price discrimination
P

P2 P1

Increased revenue from price discrimination A higher discriminatory price is now introduced

D
Q

O

150

200

Price discrimination

Profit maximisation under third-degree price discrimination

Profit-maximising output under third degree price discrimination

DX O MRX O O

(a) Market X

Profit-maximising output under third degree price discrimination

DY DX O MRX O MRY O

(a) Market X

(b) Market Y

Profit-maximising output under third degree price discrimination

DY DX O MRX O MRY O MRT

(a) Market X

(b) Market Y

(c) Total (markets X + Y)

Profit-maximising output under third degree price discrimination

MC

DY DX O MRX O MRY O MRT

(a) Market X

(b) Market Y

(c) Total (markets X + Y)

Profit-maximising output under third degree price discrimination

MC

DY DX O MRX O MRY O 3000 MRT

(a) Market X

(b) Market Y

(c) Total (markets X + Y)

Profit-maximising output under third degree price discrimination

MC

5 DX O MRX O

DY MRY O 3000 MRT

(a) Market X

(b) Market Y

(c) Total (markets X + Y)

Profit-maximising output under third degree price discrimination

MC

5 DX O 1000 O MRX

DY MRY O 3000 MRT

(a) Market X

(b) Market Y

(c) Total (markets X + Y)

Profit-maximising output under third degree price discrimination

MC

5 DX O 1000 O MRX 2000

DY MRY O 3000 MRT

(a) Market X

(b) Market Y

(c) Total (markets X + Y)

Profit-maximising output under third degree price discrimination

MC 9 5 DX O 1000 O MRX 2000 DY MRY O 3000 MRT

(a) Market X

(b) Market Y

(c) Total (markets X + Y)

Profit-maximising output under third degree price discrimination

MC 9 5 DX O 1000 O MRX 2000

7 DY MRY O 3000 MRT

(a) Market X

(b) Market Y

(c) Total (markets X + Y)

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