First-degree Price Discrimination Each output unit is sold at a different price. Price may differ across buyers. It requires that the monopolist can discover the buyer with the highest valuation of its product, the buyer with the next highest valuation and so on
First-degree Price Discrimination Each output unit is sold at a different price. Price may differ across buyers. It requires that the monopolist can discover the buyer with the highest valuation of its product, the buyer with the next highest valuation, and so on
First-degree Price Discrimination Output unit Sell the y'th unit for sp(y) p(y)H Mc(y) ply y y
First-degree Price Discrimination p(y) y $/output unit MC(y) y p(y) Sell the th unit for $ y p(y)
First-degree Price Discrimination Output unit Sell the y'th unit for sp(y). Later on p(y'A sell the y th unit for Sp(y") p(y") Mc(y) ply yy y
First-degree Price Discrimination p(y) y $/output unit MC(y) y p(y) y p(y) Sell the th unit for $ Later on sell the th unit for $ y p(y). y p(y)
First-degree Price Discrimination Output unit Sell the y'th unit for sp(y). Later on p(y,)- sell the y"th unit for $p(y"). Finally sell the y"th unit for marginal ply Mc(y) coSt, $p(y). p(y"") ply yy y y
First-degree Price Discrimination p(y) y $/output unit MC(y) y p(y) y y p(y) p(y) Sell the th unit for $ Later on sell the th unit for $ Finally sell the th unit for marginal cost, $ y p(y). y p(y). y p(y)
First-degree Price Discrimination Output unit The gains to the monopolist on these trades are: p(y)Mc(y), p(y)Mc(y) p(y') and zero ply Mc(y) p(y"") ply yy y y The consumers'gains are zero
First-degree Price Discrimination p(y) y $/output unit MC(y) y p(y) y y p(y) p(y) The gains to the monopolist on these trades are: and zero. p(y) − MC(y), p(y) − MC(y) The consumers’ gains are zero