Intermediate Micro Chap 26
Intermediate Micro Chap 26
• Second-degree: unit
• Third-degree: person
• First-degree: every unit is sold to the
consumer who values it most highly at
the highest price the consumer is willing
to pay for it.
• Since the monopolist leaves no
consumers’ surplus, all surplus goes to
the monopolist.
• Therefore, SS is maximized.
• We have interpreted the first-degree price
discrimination as selling each unit at the
maximum price a monopolist could
command.
• The MC is set to 0.
• A monopolist would want to offer x10 at
price A and x20 at price A+B+C.
• FOC becomes
MR1(y1)=MC(y1+y2)=MR2(y2).
• MR1(y1)=p1(y1)[1-1/|1|]
• MR2(y2)=p2(y2)[1-1/|2|]