Question
For this review be sure that you understand the various types of price discrimination. a. Give a specific example of a type of price discrimination
For this review be sure that you understand the various types of price discrimination. a. Give a specific example of a type of price discrimination that would harm all consumers, relative to uniform pricing. Use either diagrams or numerical examples. b. Give a specific example of a type of profitable price discrimination that would harm no consumer, but help at least some. This is relative to a uniform price that is above marginal cost. c. Give a carefully described example from your personal experience of second-degree price discrimination. d. You are a monopolist of two products, A and B. There are two types of consumers, Type 1 and Type 2. These two consumer types differ in their willingness to pay for A and B. You know that there are equal numbers of each type, but cannot identify specific individuals by their types. The following table gives their willingness to pay (WTP) for each product. Product WTP Type 1 WTP Type 2 A 8 9 B 4 3 i. Assume zero marginal costs for each product. Is pure bundling more profitable than independent pricing? Prove it. ii. Now, assume that the marginal cost of A is still zero, but the marginal cost of B is 3.5. Is pure bundling still the most profitable type of pricing, or is something else even more profitable? Prove your answer.
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