Question

what do you mean by third degree price discrimination ? when it is profitable for monopolist discriminate and how will he allocate his output into two market and charge different prices

Answer 1

Discriminating monopoly’ or ‘price discrimination’ occurs when a monop­olist charges the same buyer different prices for the different units of a commodity, even though these units are in fact homogeneous. Such a situation is described as “perfectly discriminating monopoly”. It is more usual, however, to find that a monopolist sells identical products to different buyers at different prices.

Discrimination between buyers is more usual than discrimination between units of a homogeneous commodity. In general, it can be said that price discrimination occurs when a producer sells a com­modity to different buyers at two or more different prices for reasons not associated with differences in costs. It may be either systematic (i.e., dis­crimination systematically and persistently) or unsystematic (i.e., discrimi­nation frequently or casually).

In the simplest case, there is one identical good going to two buyers (or groups of buyers).