Answer to Question #287831 in Economics for Ruhiber

Question

Suppose you are a monopolist and find that the demand elasticity of your product is different in two markets what would be your pricing strategy

Answer 1

Assumes that a monopolist firm operates in the market. It is found that the demand elasticity of its product is different in two markets. In this situation, price discrimination can be a good pricing strategy for the monopolist. Under this pricing strategy, different prices can be set in two markets. for the same product. In this way, the airline is a good example. An airline charges different prices for the same service based on submarkets (business class & economic class). In this case, price discrimination applies using discounts, loyalty programs and coupons to target customers of both markets.