1 answer

Price Discrimination - Second-degree price discrimination forces people to reveal their reservation prices. Do you agree?...

Question:

Price Discrimination - Second-degree price discrimination forces people to reveal their reservation prices. Do you agree? - D

Price Discrimination - Second-degree price discrimination forces people to reveal their reservation prices. Do you agree? - Derive the condition: P1(1+1/e1) = P2(1+1/ez). How might this expression help a firm that is deciding whether to price discriminate?

Answers

- Reservation prices are highest prices that a buyer is willing to pay. It is the first degree price discrimination that forces the consumers to reveal their reservation prices. However, the second degree price discrimination doesn't forces the consumer to reveal their reservation prices. In this competition, firms do not have detailed information about their consumers.

Second Degree price discriminating monopolist derive the reservation prices through law of diminshing marginal utility of consumers/buyers. Monopolist uses this information and charges different prices to the different number of units that a consumer purchases.

So, this competition does not forces the consumer to reveal their reservation prices.

- In third degree price discrimination, MR1 = MC in first market and MR2 = MC in second market.

In monoploy, we know that, at equilibrium, MR = MC

TR (total revenue) = P*Q

MR = P + Q(dp/dQ)

MR = P * [1 + (Q/P) * (dP/dQ)]

MR = P * [1 + (1/e)]

So, in first market,

MR1 = P1 * [1 + (1/e1)] -----equation 1

for second market,

MR2 = P2 * [1 + (1/e2)] -----------equation 2

where e = elasticity of demand = p/Q * dQ/dP

at equilibrium, MR1 = MR2 = MC

So, using equatio 1 and equation 2

P1 * [1 + (1/e1)] =   P2 * [1 + (1/e2)] ---Proved

This expression helps the monopolist in terms of charging an optimum price in a market based on its elasticity of demand.

Price will be charged high where the elasticity of demand is high and vice versa.

**if you liked the answer, then please upvote. Would be motivating for me. Thanks

.

Similar Solved Questions

1 answer
The Old English Garden Shop is a retail store that sells garden equipment, furniture, and supplies....
The Old English Garden Shop is a retail store that sells garden equipment, furniture, and supplies. Its credit purchases and purchases returns and allowances for July are listed below. The general ledger accounts used to record these transactions are also provided. The balance shown is for the begin...
1 answer
2. Assume you work in the HR department of a medium-size finance (bank) company in Turkey....
2. Assume you work in the HR department of a medium-size finance (bank) company in Turkey. The president of the company has just requested that all departments will develop a budget for the coming year and be prepared to justify their budget requests. As part of this justification, your boss, the di...
1 answer
Matlab The Homework should be submitted as a script (.m) file Write a script areaMenu that...
matlab The Homework should be submitted as a script (.m) file Write a script areaMenu that will print a menu consisting of "Cylinder," "Circle," and "Rectangle." It waits for the user to choose from the menu then call the corresponding function of each choice as follows: ...
1 answer
8.) (16 points) Give the products: NaBH4 CrOz, B. b) PCC oH → B 10.- Boa MgBr Zn(Hg) sorte sko, soma, cascunser MCPBA C...
8.) (16 points) Give the products: NaBH4 CrOz, B. b) PCC oH → B 10.- Boa MgBr Zn(Hg) sorte sko, soma, cascunser MCPBA CH,CH,MgBr B A AICI: НСІ...
1 answer
A company has established 6 pounds of Material J at $3 per pound as the standard...
A company has established 6 pounds of Material J at $3 per pound as the standard for the material in its Product Z. The company has just produced 1,000 units of this product, using 6,200 pounds of Material J that cost $17,680. The direct materials quantity variance is: $600 unfavorable. $920 unf...
2 answers
How do you find the limit of #(x^2+3)/(x^2+4)# as #x->-oo#?
How do you find the limit of #(x^2+3)/(x^2+4)# as #x->-oo#?...
1 answer
1. A disciplinary action to oversee concerning a nurse accused of stealing drugs. 2. A board...
1. A disciplinary action to oversee concerning a nurse accused of stealing drugs. 2. A board committee is seeking direction on establishing new policies on smoking and obesity. 3. Implementation of a diversity program for the faculty is requiring a lot of your attention. How would you go about handl...
1 answer
IHE CALCULATOR MESSAGE MY INSTRUCTOR 'ULL SCRE tN PRINTER VERSION BACK Exercise 16-23 On June 1,...
IHE CALCULATOR MESSAGE MY INSTRUCTOR 'ULL SCRE tN PRINTER VERSION BACK Exercise 16-23 On June 1, 2015, Pronghorn Company and Stellar Company merged to form Pearl Inc. A total of 811,000 shares were issued to complete the merger. The new corporation reports on a calendar-year basis On April 1, 20...
1 answer
You are a urologic nurse whose patient has voiced concern over his kidneys losing their   function within...
You are a urologic nurse whose patient has voiced concern over his kidneys losing their   function within the past few weeks. He has maintained a log of the past week, recording          his urination and fluid intake. He has a history...
1 answer
Econ profit maximization
A purely competitive firm finds that the market price for its product is $30.00. It has a fixed cost of $100.00 and a variable cost of $15.00 per unit for the first 50units and then $35.00 per unit for all successive units.Does price exceed average variable cost for the first 50 units?What is the av...
1 answer
Can you please explain in details? In order to avoid runs of good luck for the...
Can you please explain in details? In order to avoid runs of good luck for the player, a fruit machine owner alters his machine in the following way. If W denotes 'win'for the player and L denotes 'lose', then on any given play the probability of W is arranged to be W (state WW) 0.1 ...
1 answer
How can you evaluate #(k-4h+2)/(2k)+(4k+3h-1)/(7k)#?
How can you evaluate #(k-4h+2)/(2k)+(4k+3h-1)/(7k)#?...
1 answer
Please show the process used to solve, thanks! Use partial fractions decomposition and the table of...
Please show the process used to solve, thanks! Use partial fractions decomposition and the table of Laplace transforms to find the inverse Laplace transform of 8 F(8) $3 +682 +8s...
1 answer
Required information The following information applies to the questions displayed below. The following events occur for...
Required information The following information applies to the questions displayed below. The following events occur for The Underwood Corporation during 2021 and 2022, its first two years of operations. June 12, 2821 Provide services to customers on account for $38,000. September 17, 2021 Receive $2...