9. A model of price discrimination Daesun, a retiree, owns and lives in the desert on a piece of land that isn\'t worth much. One day, a giant meteor falls in the middle of his property. As it turns out, two groups of people are interested in visiting the meteor: scientists (Market A) and tourists (Market B). Daesun decides to sea tickets to visit the meteor in both Market A and Market B. He stays home all day anyway, so collecting money from visitors isn\'t a problem for him. Therefore, you can assume he has zero costs. Also, Daesun has a very good memory and will allow only the person who bought each ticket to use it. Thus, you can assume that all tickets are nontransferable. The demand and marginal revenue curves for the two markets are shown on the following two graphs.
Solution
8. True, because perfectly competitive firms have no market power.
9. at p=4, Q a =6 Q B =2, Q= 6+2=8
P A =5, P B =3, Q= Q A + Q B =5+3= 8
Revenue with price discrimination 5*5 +3*3 =34
Higher price is charged in markets with lower elasticity
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9- A model of price discrimination Daesun- a retiree- owns and lives.docx
1. 9. A model of price discrimination Daesun, a retiree, owns and lives in the desert on a piece of
land that isn't worth much. One day, a giant meteor falls in the middle of his property. As it
turns out, two groups of people are interested in visiting the meteor: scientists (Market A) and
tourists (Market B). Daesun decides to sea tickets to visit the meteor in both Market A and
Market B. He stays home all day anyway, so collecting money from visitors isn't a problem for
him. Therefore, you can assume he has zero costs. Also, Daesun has a very good memory and
will allow only the person who bought each ticket to use it. Thus, you can assume that all tickets
are nontransferable. The demand and marginal revenue curves for the two markets are shown on
the following two graphs.
Solution
8. True, because perfectly competitive firms have no market power.
9. at p=4, Q a =6 Q B =2, Q= 6+2=8
P A =5, P B =3, Q= Q A + Q B =5+3= 8
Revenue with price discrimination 5*5 +3*3 =34
Higher price is charged in markets with lower elasticity
