Article: Justices Weigh Case On Imported Textbooks
Publishers set different prices for textbooks in different geographic markets
• Price Discrimination
Increases profits by permitting monopolist to sell additional output without
Monopolist will charge high price to customers with low price elasticity of demand
and low price to customers with high price elasticity of demand
Monopolist must be able to segment (separate) its customers
(If customers with high price elasticity of demand by at “low” price and then resell
at “low” price to other customers, price discrimination fails.)
Why do stores issue coupons, in newspapers or flyers or on the web, which
permit buyers to obtain a price discount?
(Most individual ignore these coupons)
Answer: price discrimination
Buyer who use coupons: high elasticity of demand (buy at discounted, lower
Buyers who do not use coupons: low elasticity of demand (buy at full, higher
Why is Monopoly “Bad”?
1. Allocatively inefficient (due to reduced output)
2. Not Monopoly Profit
1. If consumer pays $1 more to producer as a result of monopoly price: Consumer
worse off by $1 Producer better off by $1
2. Transfer from consumer to producer
• Is consumer more deserving?
• Is producer more deserving?
• Who decides?
3. Welfare cost of monopoly is loss in total sur