Figure 10-6 Price Discrimination Among Units of Output
Different Forms of Price Discrimination
Now that we have seen the conditions that make price discrimination
possible, let’s examine the two general forms that it can take: price
discrimination among units of output and price discrimination among
market segments.
Price Discrimination Among Units of Output
Recall our discussion in Chapter 6 where we noted that the demand
curve can be viewed as a willingness to pay curve. We also discussed the
concept of consumer surplus, the difference between the price the
consumer is willing to pay and the price that the consumer actually pays.
A firm that charges different prices for different units of a product is
trying to capture some of this consumer surplus. Figure 10-6 shows a
monopolist’s profits in two situations. In the first, the monopolist is only
able to charge a single price per unit. In the second, the monopolist is
able to charge different prices on different units of output and it increases
its profits by doing so. Notice that even in the case where the firm charges
several prices, consumers still earn some consumer surplus.