a/b
pm
=(a+bc)/2b
c
D
MR
qm
=(a-bc)/2
a-bc
Figure 1 : Uniform monopoly pricing
Marginal revenue equals marginal cost for q m 
pm 
a  bc  .
2b
a
q
a  bc  , and the corresponding price is
2
a/b
pm
CS
PS
DWL
c
D
qm
a
q
Figure 2 : Surpluses and Deadweight Loss
CS : consumer surplus (triangular area with vertical stripes between the inverse demand
curve, D, and price pm; PS : producer surplus (rectangular area in dots above marginal
cost); DWL : deadweight loss (triangular area with horizontal ticking)
P (€ per
unit)
L
N
M
CS1
J
pmar
K
c
D1
q1
D2
q2
q
Figure 3 : Sub-optimality of two-part pricing
CS1 : Consumer surplus for Type 1 (triangular area in dots between the inverse demand
curve D1 and price P.
: T1
p
+
: T2
R1
T1
c
D1
0
q1
D1
q2
D2
q
Figure 4 : Tariffs and informational rents
The tariff T1, paid by Type 1 buyers, is their gross surplus, the area under demand curve
D1. The informational rent is the area between the two demand curves, from quantity 0 to
q1. The tariff T2, paid by Type 2 buyers, is their gross surplus minus the informational
rent.
p
P2(q1)
P2(q)
λ (1-α)
P1(q1)
(1+ λ) α
P1(q)
c
q1
q2
q
Figure 5 : Optimal nonlinear pricing
The vertical distance between c and P1(q) is proportional to 1   a , and the vertical
distance between P1(q1) and P2(q2) is proportional to  1  a .
c(q)
T,c
ICi,0
c’(qi*)
θi
Ti*
0
qi*
q
Figure 6 : Price and quality with perfect discrimination
ICi,0 is an indifference curve with slope θi going through the origin, and corresponds to
zero surplus; c(q) is marginal cost where q stands for quality.
ICh,0
R
T,c
c(q)
ICh,l
ICl,0
Th*
Tl*
0
ql*
qh *
q
Figure 7 : Prices and qualities under individual arbitrage
The informational rent R corresponds to the vertical distance between the indifference
curve IC2,0 and the indifference curve IC2,1.