Economics †Product Differentiation in Monopoly Essay

Monopolies ar firms that are the sole or dominant suppliers of a good or service in a given market. And what sets isolated monopolies from competitive firms is market power- the ability of a firm to arrogate the market monetary jimmy. Price discrimination is the business practice of selling the similar good at polar costs to different customers, even though the live of production is the same for all customers. Only monopolies can practice terms discrimination, because otherwise competition would prevent price discrimination.Price discrimination increases the monopolists profits, reduces the consumer surplus and reduces the deadweight loss. (the buyers of the lower-priced product should not be able to sell the product to the higher-priced market. Otherwise, the monopoly will not be able to maintain price differentials. ) The monopolist must be able to identify segments of the market that are willing to pay different prices, and so market its products accordingly. A common place technique to achieve this is by making it harder to get the lower prices, since wealthier consumers value their time more than their money.Some ways the noncompetitive firms can carry out discriminatory pricing are Linear Approximation Technique or Markup Pricing Technique Personalized Pricing extracting the maximum amount a customer is willing to pay for the product. Coupons and Rebates providing coupons to attract more customers or providing individualised discounts.Bulk pricing offering lower prices when customer buys a capacious quantity of the same product. Bundling joining products or services unneurotic in order to sell them as a single unite unit. Block pricing Charging more for the first set of the product, then less(prenominal) for each additional product bought by the same consumer. Group Pricing- charging different customers different price found on factors such as race, gender, age, abilities etcetera and also psychographic segmentation- dividing cons umers based on their lifestyle, personality, values, and social class.Charging different prices based on geographic location. Some products may be cheaper to produce in different places and based on the cost of the good sold the monopolistic firm can charge different prices in order to maximise its profits. Placing restrictions or other inferior characteristics on the low-price good or service, so as to make it sufficiently less attractive to the high price segment Establishing a schedule of volume discounts (block pricing) such that only large-volume buyers (who may have more elastic demands) qualify victimisation a two-part tariff, where the customer pays an up-front fee for the right to buy the product and then pays additional fees for each unit of the product consumed.