Third degree price discrimination example: With linear demands, you'll sell the same quantity whether you practice third degree price discrimination or not...but with price discrimination you'll raise the price for the inelastic demands, and lower the price for the elastic demanders.
#thirddegreepricediscrimination #mrmc #3rddegreepricediscrimination #intermediatemicro
Whole market total economic surplus: 102,083.33
PS: (208.33 - 150)x 875=51,038.75
CS: 1/2(800/3 - 208.33)x 875 = 25,522.29
DWL: 25,520.83
(rounding errors)
Pittsburgh total economic surplus: 50,000
CS: 1/2(250 - 200)x500= 12,500
PS: (200 - 150)x 500 = 25,000
DWL: 12,500
Non-Pittsburgh total economic surplus: 56,250
CS: 1/2(300 - 225)x375=14,062.50
PS: (225 - 150)x 375 = 28,125
DWL: 14,062.50
Total CS with 3rd degree P.D. = 26,562.5
Note the welfare result is driven by how these demands match up; there's an efficiency gain to pricing more appropriately for each segment.
