Price discrimination
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3. SAR Publisher is a monopolist in publishing a textbook on Hong Kong economy. Besides the Hong Kong market, SAR Publisher also sells this textbook in the US. Suppose SAR Publisher can produce this textbook at a constant marginal cost of $20 per copy and the demand curves for the two markets are given by:
QUS = 48, 000 - 600PUS;
QHK = 42, 000 - 300PHK,
where all prices are in expressed US dollars.
(a) What conditions must be satisfied for SAR Publisher to practice price
discrimination between the two markets?
(b) Assume that the conditions you described in part (a) are satisfied. What
price will SAR Publisher charge its textbook in each market, assuming
there is no shipping cost?
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Solution Summary
Price discrimination is contextualized. A monopolist in publishing a textbook on Hong Kong economy is determined.
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3. SAR Publisher is a monopolist in publishing a textbook on Hong Kong economy. Besides the Hong Kong market, SAR Publisher also sells this textbook in the
US. Suppose SAR Publisher can produce this textbook at a constant marginal cost of $20 per copy and the demand curves for the two markets are given by:
QUS = 48, 000 - 600PUS;
QHK = 42, 000 - 300PHK,
where all prices ...
Education
- BE, Bangalore University, India
- MS, University of Wisconsin-Madison
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