PRESENTATION
ON
DISCRIMINATING
MONOPOLY
BY
SHAHBANO PARVEEN
Associate Professor in Economics,
P.G. Govt. College, Sector-11,Chandigarh
MONOPOLY
A situation of market in which there is
a single seller of a product with no close
substitutes and there are barriers to entry
and producer is price maker
DISCRIMINATING MONOPOLY
A monopolist often charges different
prices of the same product from different
consumers
DEFINITIONS
Koutsoyiannis,
“Price
discrimination
exists when the same product is sold at
different prices to different buyers”.
Mrs. Joan Robinson, “The act of selling
the same article produced under single
control at a different price is known as
price discrimination”.
KINDS OF DISCRIMINATING
MONOPOLY
1. Personal Price Discrimination
When a monopolist charges different prices
from different customers for the same product.
2. Geographical Price discrimination
When a monopolist charges different prices in
different areas for the same product.
3.Price discrimination according to use:
When a monopolist charges different prices for
different uses of a product.
WHEN IS PRICE DISCRIMINATION
POSSIBLE?
1.
2.
3.
4.
5.
6.
7.
8.
Existence of Monopoly
Separate Market
Difference in the Elasticity of Demand
Expenditure in dividing and sub dividing
market to be minimum
Commodity to order
Legal Sanction
Product differentiation
Behaviour of the Consumers
PRICE AND OUTPUT DETERMIANTION UNDER
DICRIMINATING MONOPOLY
Each discriminating monopolist,
in order to
maximize his profit, will produce upto that level
where his marginal revenue is equal to marginal
cost.
Discriminating monopolist is to decide about
1. The total output to produce
2. How much of the output to be sold in
different markets and at what price, so as to
get maximum profit.
CONDITIONS
1.
Monopolist must get same marginal
revenue in both markets:
The marginal revenue of both the markets must
be the same i.e. MR1=MR2
2. Equality between MR and MC:
Condition of maximum profit or equilibrium is
that marginal revenue earned in each market
should be equal to the marginal cost of the total
output
MR1 = MR2 = MC
C
If Monopolist produces OQ output than:
1.
Marginal cost of total output equal to
combined marginal revenue.
2.
Marginal revenue of both markets is equal
3.
Marginal revenue of both markets is equal
to marginal cost of total output
EFFECTS OF PRICE DISCRIMINATION


Beneficial Effects.
- Beneficial to the Poor
- Public Utility Services
- Full Utilization of Resources
Harmful Effects
- No Proper Use of Factors of Production
- Less Production