Second degree price discrimination “is necessarily practised in markets where there are many buyers, sometimes hundreds of thousands of them.” One rate or price schedule must apply to all buyers. For each segment, from the highest portion of the demand curve to the lowest, the utility can charge a different price, one which reflects the willingness of the customer to buy a given amount, of say, electricity at that price. If the demand curve of any customer is known, the public utility can divide that demand curve into small segments, so that, in effect, it becomes many customers. The different of rates charged by public utilities like the CESC is an obvious example. This is frequently found in public utility pricing. In discrimination of the second degree, the monopolist captures parts of his buyers’, consumers’, surplus, but not all. Obviously, it could occur only rarely where a monopolist has only a few buyers. This kind of discrimination is the limiting, or extreme, case. The monopolist must then adjust his units of sale. When consumers buy more than one unit of the monopolist’s product, they are willing to buy more units at lower prices. The simplest kind of discrimination of the first degree is one where, for some reason, each of his customers buy only one unit from the monopolist. Joan Robinson calls this phenomenon perfect discrimination, which is perfect, however, only from the point of view of the monopolist. This type of situation is illustrated in Fig.1. This means that he changes the maximum price a consumer is ready to pay for each unit, i.e., as much as the traffic will bear. This type of situation occurs when the monopolist sells each unit of his product at a different price. He then fixes up prices accordingly and takes from each consumer the entire amount of his consumer’s surplus. In discrimination of the first degree, the monopolist knows the maximum amount of money each consumer will pay for any quantity. The limit is defined in the concept of discrimination of the first degree, a concept introduced by A.C.
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