Price Discrimination - Section 11, Module 63

Price Discrimination: A way for monopolists to increase their profit by charging consumers different prices for the same product

Single price monopolists - those that charge everyone the same price (ex: small town gas station with no competitors)

Price Discriminating monopolists - those that charge different consumers different prices (ex: airline tickets - it might be $300 for one person but $500 for another, depending on the timing and the closeness of the date)

Price discrimination happens in monopolies, monopolistic competition, and oligopolies

depends on the individual price elasticity of the consumers: different consumers react to price changes in different ways

perfect price discrimination - when the consumer surplus becomes part of the profit → the greater the number of different prices, the closer the monopolist is to perfect price discrimination

• also gets rid of allocative inefficiency