MARKET SEGMENTATION: Type III Discrimination: Price per customer segment A company has differentiated its customers into 2 segments between which arbitrage is not possible, arriving at following result: Q1 = 200 - P and Q2 = 180 - 1.5 P. Its MC is constant and equal to 70. Commercial Strategy Manager wants to know: (a) If it is convenient for it to apply type III price discrimination, compared to that which would be obtained with the application of a single price for all units, in terms of extraordinary profit. b) If it applies type III price discrimination, what is market power it has in each segment. c) What is price elasticity of demand in each segment, at respective break-even points.
MARKET SEGMENTATION: Type III Discrimination: Price per customer segment A company has differentiated its customers into 2 segments between which arbitrage is not possible, arriving at following result: Q1 = 200 - P and Q2 = 180 - 1.5 P. Its MC is constant and equal to 70. Commercial Strategy Manager wants to know: (a) If it is convenient for it to apply type III price discrimination, compared to that which would be obtained with the application of a single price for all units, in terms of extraordinary profit. b) If it applies type III price discrimination, what is market power it has in each segment. c) What is price elasticity of demand in each segment, at respective break-even points.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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MARKET SEGMENTATION: Type III Discrimination:
A company has differentiated its customers into 2 segments between which arbitrage is not possible, arriving at following result:
Q1 = 200 - P and Q2 = 180 - 1.5 P. Its MC is constant and equal to 70. Commercial Strategy Manager wants to know:
(a) If it is convenient for it to apply type III
b) If it applies type III price discrimination, what is market power it has in each segment.
c) What is
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