Monopoly II

In the first Learning Path on monopolies, we learned about what they are, how they affect social welfare and we learned about a few types. In this second LP on monopolies, we’ll learn about a few more types, quite particular ones. We’ll learn about discriminating monopolies, how the implement different prices in order to extract all consumer surplus. We’ll also learn about natural monopolies, which are tricky since they are actually good for society.

In this LP we’ll learn about:

 

Discriminating monopolies:

Price discrimination, implemented by monopolies, can be either really harmful, or really sweet;

First degree price discrimination, really harmful, but quite impossible to implement;

Second degree price discrimination, it may hide an entrance fee in the form of discounts;

Third degree price discrimination, the good kind, takes the form of discounts to some people such as students;

Two-part tariff, which consist of an entrance fee and a price per unit.

 

Natural monopolies:

Subadditivity, the reason why natural monopolies exist;

Natural monopoly, which should not be regulated.

 

 

Let’s start by learning about price discrimination.