WOLFRAM|DEMONSTRATIONS PROJECT

Discriminating Monopolist with Two Independent Markets

This Demonstration studies an important case in industrial organization: how a discriminating monopolist sets prices in two independent markets. The discriminating monopolist faces a broken curve that we call
ΣMR
, which is a result of "horizontal summation" of the marginal revenue functions of both markets. The monopolist sets prices from the condition
MR(
q
1
)=MR(
q
2
)=MC(
q
1
+
q
2
)
. This model differs from the important case of nondiscriminating monopoly, with a broken and discontinuous total marginal revenue curve
MR(q)
derived from a broken total demand curve. Understanding the difference between
ΣMR
and
MR(q)
is essential to understanding the models.