First degree price discrimination

[xy_lem]

It's not true that first degree price discrimination results in zero consumer surplus. For example, in an auction (a case of first degree price discrimination) let's say the consumer intends to pay a maximum of $20. However, if the bid rises to $10 and by bidding $11, he will have no other challengers who would want to bid higher, he is able to

Comments

[hyde0ut]

don't think there's any conceptual error but rmb that 1st degree price discrimination (like so many other econz concepts) is mostly theoretical and may not be entirely accurate in reality! ya so it probably doesn't really apply to auctions

[anonymous]

hey great observation there! shall try a guess here:

could it be that the demand curve disappears beyond the $11 dolllar mark? i.e. there's no more market beyond the price where there's only one willing buyer.

as such the seller has no market control (cannot price discrminate) to exploit the consumer above $11 (which for an auction the seller must promise to sell at the highest price claimed).

i would imagine a demand curve which is vertical beyond $11, then sloping downwards at prices lower than that...

and that's why there's still no consumer surplus in auctions. (:

[indefinibella]

i was about to snarl disgust at you, wondering what you were doing with your life by blogging about these things. and contemplating to stop being your friend.

then i read what anonymous wrote, which was actually really intriguing. another lesson in reserving judgments before embarrassing myself.

[xy_lem]

omg who are you? pls sign off next time, i think you have things i could reply but i need to know who you are first haha. so pls let me know thank you!

ning

Reply to anonymous

[xy_lem]

Hey this is long overdue but i think you are right! I happened to come back to this post again and after some thought, I realise where my mistake was and it pretty much concurred with what you posted! Who are you!! I still want to know!!

Basically the idea is that the price discrimination is limited by the demand that's all haha. And since the demand curve represents the quantity demanded at each price and at $11 the total quantity demanded by the market as a whole is 1, which can be assumed as the quantity supplied in this case, the demand curve at prices $11 and above coincides with the perfectly inelastic supply curve to form the vertical line as described. So since demand curve n supply curve are the same line, there is zero consumer surplus.

Am I correct there? Comments anyone?

Does that mean that if quantity supplied increases, we will start seeing some consumer surplus?

ning

[anonymous]

oh nooo i've returned about 60% of my knowledge together with the notesss! HAHAHAH. sorry i can't help you out there :(

but good to see you back in bloggin while i've probably resigned from it. lol!!

takecare and happy chinese new year! (:

sher.

i don't understand.

[anonymous]

i really don't understand anything here. =| all your posts are about econs!
-sheila

Re: i don't understand.

[xy_lem]

not really, i blog abt other things too. but i tink many of them are also bewildering. hmmm wad can i blog abt tt u'll understand? medicine? football? bad poetry?

ning