2. price-discriminating monopoly: charges different prices to different people or to different quantities demanded 3. monopoly under asymmetric information: incentives for truthful choices 2.1. Single-Price Monopoly The demand: p=p(y). The revenue: R(y)=p(y)y Profit maximization p(y)+p(y)y*=( Discussion: MR=P11、 where n=-2 is price elasticity of demand. If Mc>0, then n>1 2. Zero profit or loss is possible 3. No supply curve Example 2.4. Consider p=A-a 2.2. Price-Discriminating Monopoly Perfect price discrimination: charge a different price for each different unit A monopoly does better by charging multiple prices. t Perfect price discrimination gives the maximum revenue for a given y Since MR=p(y), profit maximization implies f p(y)=MC(y) 1. Monopoly price generally exceeds competitive price 2. Monopoly quantity is generally less than competitive quantity 3. The more perfectly the monopoly can price discriminate, the closer its output is to the competitive output2. price-discriminating monopoly: charges different prices to different people or to different quantities demanded. 3. monopoly under asymmetric information: incentives for truthful choices. 2.1. Single-Price Monopoly The demand: pd = p(y). The revenue: R(y) ≡ p(y)y. Profit maximization: † p(y∗ ) + p0 (y∗ )y∗ = c0 (y∗ ). Discussion: 1. MR = p  1 − 1 η  , where η = −p y dyd dp is price elasticity of demand. If MC ≥ 0, then η ≥ 1. 2. Zero profit or loss is possible. 3. No supply curve. Example 2.4. Consider pd = A − ay.  2.2. Price-Discriminating Monopoly Perfect price discrimination: charge a different price for each different unit. A monopoly does better by charging multiple prices. † Perfect price discrimination gives the maximum revenue for a given y.† Since MR = p(y), profit maximization implies † p(y∗ ) = MC(y∗ ). Discussion: 1. Monopoly price generally exceeds competitive price. 2. Monopoly quantity is generally less than competitive quantity. 3. The more perfectly the monopoly can price discriminate, the closer its output is to the competitive output. 2—3