A Monopolist Would Like to Practice Third-Degree Price Discrimination

question 45

Essay

A monopolist would like to practice third-degree price discrimination. Its first group of customers is represented by the demand equation, Q_D1 = 10 - P₁. The second group is represented by the demand equation, Q_D2 = 10 - 2P_2. Assume marginal costs of $4 in both markets. Compare the profit the monopolist would make as a single-price monopolist to what it would earn with third-degree price discrimination. Based on your calculations, does it make sense for this monopolist to price discriminate?

Describe challenges specific to the trucking industry.

Understand the functionalities of transportation management systems (TMS) in carrier selection.

Understand the strategic purpose behind routing guides in transportation logistics.

Understand and identify different behavior modification techniques.

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Definitions:

Expected Value

The expected value of a random variable is the long-run average value of repetitions of the experiment it represents.

Normal Approximation

A method used to estimate the probabilities of a binomial distribution by approximating it with a normal distribution, especially useful for large sample sizes.

Binomial Distribution

An analytical model that represents the probability of a variable adopting one out of two distinct values, contingent upon specified parameters.

Radio Listeners

Individuals who tune in to radio broadcasts or programs.