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Total revenue results if a monopolist were able to engage in perfect price descrimination?
What would Total revenue results be if a monopolist were able to engage in perfect price descrimination?
and would the monopolist be able to increase its profits if it engaged in price discrimination?
Total revenue and profits would both increase if a monopolist were able to engage in perfect price discrimination.
Use a simplified example: Suppose a monopolist were selling a product that costs a constant $10 to produce. Suppose there are 4 potential consumers: A would be willing to pay $5, B would be willing to pay $15, C would be willing to pay $25, and D would be willing to pay $35. Each consumer would purchase one unit.
Consumer A would not be considered: selling to him would result in losses.
Without price discrimination, the monopolist would maximize profits by charging $25, selling only to consumers C and D, creating total revenue of $50, profits of $30.
With price discrimination, the monopolist could sell to consumers B, C, and D, charging exactly what each consumer is willing to pay, creating revenue of $90 and profits of $60. Total revenue and profits both go up with price discrimination.
A Perfect Circle - 2000-09-11 - Ozzy's Cure
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