ECO101H1 Lecture Notes - Perfect Competition, Marginal Cost, Takers
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ECO101H1 Full Course Notes
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- monopolist will, if can, charge high price to customers with low price elasticity of demand, and conversely. - to price discriminate, monopolist (or any firm that faces a downward-sloping dd) must find way to segment its customers. Monopolists always segment customers by their different price elasticities of demand. Travel (lower airline tickets for staying over weekends, or 2-week advance booking) Students have high price elasticity of demand (poor) To prevent business travelers who have low price elasticity from getting low airline fares. - business travelers usually do not want to fly on weekends because they want to be with their families on weekends; - business travels are often spontaneous; its hard to set up 2-week in advance. Customers with high price elasticity will use coupons; (people with lower income are willing to take time collecting and cutting out coupons while people with higher income are willing to just pay the price. )
