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Perfect Price Discrimination
charging each consumer their willingness to pay
Price discrimination
charging different prices to different consumers for the same good (ex: airplane tickets, insurance)
Why does D=MR?
able to charge 1st consumer and 2nd consumer different amounts, thus it changes
Consumer surplus
turns to profit, area under demand and to MC=MR
Producer surplus
ask question
DWL
none because you are charging their max willingness to pay
profit
same as consumer surplus
allocative efficiency in a perfect price discriminating monopoly
P=MC
conditions necessary to price discriminate
firm must have some control over price, there must be different consumers with a different willingness to pay, must be able to segment the market, no reselling (wouldn’t be able to control the price)
