Third degree price discrimination
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Third degree price discrimination: A firm is a monopoly in two markets. The demand function in market 1 is p1 = 2 - q1 and p2 = 1 - q2 in market 2. The cost function is C (Q) = 2Q2: Will the firm be willing to serve market 2?
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Solution Summary
Third degree price discrimination is typified.
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The monopoly chooses to charge the different prices to different group of consumers at where MR = MC in each market,
Market 1:
P1 =2 -q1
TR1 = P1*q1
= (2- q1)*q1
=2q1- q1^2
MR1 = ∂TR1/∂q1
=2 ...
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