Currently, perfect price discrimination-in which each person is charged a price at (or a smidge below) their reservation price, which is also their marginal benefit-is mostly a hypothetical scenario. However, as data mining becomes more ubiquitous, we may see markets that more closely resemble perfect price discrimination through individual pricing. a. Use a graph to illustrate perfect price discrimination. b. Explain how perfect price discrimination benefits the seller and depict the new producer surplus on the graph. c. Explain how perfect price discrimination benefits the buyer and depict the new consumer surplus on the graph.d. Explain how perfect price discrimination impacts the total market quantity. e. Discuss whether the new equilibrium quantity is a socially optimum level.

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter7: Consumers, Producers, And The Efficiency Of Markets
Section: Chapter Questions
Problem 10PA: A friend of yours is considering two cell phone service providers. Provider A charges 120 per month...
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Currently, perfect price discrimination-in which each
person is charged a price at (or a smidge below) their
reservation price, which is also their marginal benefit-is
mostly a hypothetical scenario. However, as data
mining becomes more ubiquitous, we may see markets
that more closely resemble perfect price discrimination
through individual pricing. a. Use a graph to illustrate
perfect price discrimination. b. Explain how perfect
price discrimination benefits the seller and depict the
new producer surplus on the graph. c. Explain how
perfect price discrimination benefits the buyer and
depict the new consumer surplus on the graph.d.
Explain how perfect price discrimination impacts the
total market quantity. e. Discuss whether the new
equilibrium quantity is a socially optimum level.
Transcribed Image Text:Currently, perfect price discrimination-in which each person is charged a price at (or a smidge below) their reservation price, which is also their marginal benefit-is mostly a hypothetical scenario. However, as data mining becomes more ubiquitous, we may see markets that more closely resemble perfect price discrimination through individual pricing. a. Use a graph to illustrate perfect price discrimination. b. Explain how perfect price discrimination benefits the seller and depict the new producer surplus on the graph. c. Explain how perfect price discrimination benefits the buyer and depict the new consumer surplus on the graph.d. Explain how perfect price discrimination impacts the total market quantity. e. Discuss whether the new equilibrium quantity is a socially optimum level.
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