Price Discrimination , price discrimination under Monopoly , Types & Degrees of Price Discrimination
Price discrimination
Price discrimination is a method of pricing adopted by the monopolist in order to earn abnormal profits.
it refers to the practice of charging different prices for different units of the same commodity.
Mrs. John Robinson : “The act of selling the same article produced under single control at different price.”
Types of price discrimination
• Personal price discrimination : Doctors Fees
• Geographical price discrimination : Dumping
• Price discrimination according to use : Electricity
• Price discrimination according to time : Movie Tickets
Conditions for Price-discrimination
• The seller should have some control over the supply of his product( Monopoly)
• The seller should be able to divide his market into two or more sub-markets.
• The Price elasticity of the product should be different in different sub markets
- Inelastic demand …Higher Price
- Elastic demand ……Lower Price
• it should not be possible for the buyers of low price market to resell the product to the buyers of high price market.
• Legal sanction
Objectives of Price discrimination
• to earn maximum profit
• to dispose off surplus
• to capture foreign markets
• to enjoy Economies of scale.
DEGREES OF PRICE DISCRIMINATION
Price discrimination may be related to the consumer surplus enjoy by the consumers.
Pro. Pigou classified 3 degrees of price discrimination.
1.First degree Price discrimination :
The monopolist will fix a price which will take away the entire consumers surplus .
2.Second degree of Price discrimination
he will take away only a part of the consumers surplus. Here price varies
according to the quantity sold. Larger quantities are available at lower unit price.
3.Third degree price discrimination
Price Varies by attributes such as location or by customer segment. Here the monopolist will divide the consumers into separate sub-markets and charge different prices in different sub markets. Ex. Dumping
Equilibrium under Price Discrimination
टिप्पणियाँ
एक टिप्पणी भेजें