This document discusses international price discrimination, also known as dumping. It explains that dumping occurs when a firm charges a lower price abroad than at home for the same good due to higher price elasticity of demand in foreign markets. This allows the firm to earn higher profits than selling at a single price globally. The demand curve is downward sloping in the domestic market where the firm has monopoly power, and perfectly elastic in foreign markets where it faces competition. The firm determines the optimal output level where marginal cost equals aggregate marginal revenue from both markets. It then divides output between markets, charging different prices to extract the maximum profits possible through price discrimination.

2. Introduction:
Price Discrimination can also be practiced
between the domestic and the foreign market.
International Price Discrimination is called
dumping.

3.  This refers to the charging of a lower price
abroad than at home for the same
commodity because of the greater price
elasticity of demand in the foreign market.
The monopolist earns higher profits than by
selling the best level of output at the same
price in both markets.

4. The demand curve for the product will be
perfectly elastic for him in the market in which
he faces perfect competition, while the
demand curve will be a sloping downward in
the market in which he enjoys monopoly
positions.

5. The price elasticity of demand for the
monopolist’s product abroad is higher than
at home because of the competition from
producers from other nations in the foreign
market.
Foreign competition is usually restricted at
home by import tariffs or other trade barriers.

6. • In the home market in which the producer has a
monopoly, demand curve or average revenue
curve ARH is sloping downward.so does the MRH
curve.
• In the international market in which the faces
perfect competition, the demand for this product is
perfectly elastic. The ARW curve of the producer
in the world market is, therefore, a horizontal
straight line and MRW coincides with it. This
situation is depicted in this figure.

7. Graphically Representation:
PW
C
B
PH
0 R M output X
K1
D1
E
MRH
Y
ARW =MRW
MC
DF
ARH
PriceandCost

8. • MC is the marginal cost curve of output.
• AMR curve in this case is the composite curve
BFED which is the lateral summation of MRH
and MRW.
• The MC curve intersects the Aggregate
marginal revenue curve BFED at point E and
equilibrium output OM is determined.

9. • When amount OR is sold in the home market,
the MR is RF which is equal to MC (ME). Thus,
out of total output OM, amount OR will be sold in
the home market and price OPH will be charged.
• Rest of the amount RM will be sold in the world
market at price OPW Area CEFB represents the
total profits earned by the producer from the
both the markets.

10. Types of Dumping:
• Persistent Dumping
• Predatory Dumping

11. Persistent Dumping:
• Persistent dumping is the most usual one and
arises when a monopolist pursuing the
objectives of profit maximization perceives
that there exist differences in price elasticity
of demand in the domestic and international
market.

12. Predatory Dumping:
• Predatory Dumping represents unfair method
of competition because under it a producer
deliberately sells his product in a foreign
country at a lower price in order to eliminate
competitors and gain control of the foreign
market for a short period of time.

13. References:
1. Managerial Economics, principles and worldwide
applications, eighth edition(2019) , Dominick salvatore,
siddhartha K.Rastogi.
2. Modern Microeconomics,second edition(2017)
A.Koutsoyiannis.
3. Advanced economic theory: Microeconomic analysis,
Nineteenth edition, H.L.Ahuja.
4. Various Online sources.