Economics †product differentiation in monopoly Essay

Monopolies are firms that are the sole or dominant suppliers of a dear or service in a given securities industry. And what plants apart monopolies from competitive firms is market power- the ability of a firm to affect the market price. value discrimination is the business pull of selling the identical safe(p) at different prices to different guests, level though the cost of production is the same for all customers. Only monopolies do-nothing practice price discrimination, because otherwise competition would prevent price discrimination.Price discrimination increases the monopolists profits, reduces the consumer surplus and reduces the deadweight loss. (the dealers of the lower-priced product should not be fit to resell the product to the higher-priced market. Otherwise, the monopoly will not be able to maintain price differentials. ) The monopolist must be able to commit segments of the market that are willing to pay different prices, and then market its products accordi ngly. A common technique to achieve this is by making it harder to arrive at the lower prices, since wealthier consumers value their time much than their money.Some ways the noncompetitive firms can implement discriminatory pricing are Linear mind Technique or Markup Pricing Technique Personalized Pricing extracting the uttermost amount a customer is willing to pay for the product. Coupons and Rebates providing coupons to attract more customers or providing personalized discounts. Bulk pricing offering lower prices when customer buys a huge quantity of the same product. Bundling joining products or services together in order to sell them as a single combined unit.Block pricing Charging more for the first set of the product, then less for each additional product bought by the same consumer. Group Pricing- charging different customers different price based on factors much(prenominal) as race, gender, age, abilities etc. and also psychographic segmentation- dividing consumer s based on their lifestyle, personality, values, and hearty 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 maximize its profits.Placing restrictions or other inferior characteristics on the low-price good or service, so as to make it sufficiently less beautiful to the high price segment Establishing a schedule of volume discounts ( pig out pricing) such that only large-volume buyers (who may have more ductile demands) qualify Using 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.