Monopoly
Monopoly and Price discrimination of Indian Railways
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Prepared By:
Name :Mohamed Ali .K
ID :2016hb74036
Email :2016hb74036@wilp.bits-pilani.ac.in
Assignment: Managerial Economics
Do you think Indian Railway is an example for monopoly market? What are the types of price discrimination that Indian railway practice?
Introduction
In economics, monopoly in its pursuit form is the case of a single seller. The market demand for its product is the only constraint on the firm’s pricing policies. Barriers to entry prevent new firms from coming in to industry. It exists when delivery of a particular product or service is completely controlled by an individual
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First degree price discrimination: In first degree price discrimination, price changes by customer 's willingness or ability to pay. It is perfect price discrimination and hence there is no consumer surplus. Auction is an example for this type of price discrimination. Indian railways do not employ any first degree price discrimination.
2. Second degree price discrimination: In second degree price discrimination, price changes in accordance with the quantity sold. Usually monopolist sets the block prices, under which prices are highest for first block of quantity bought and it is reduced for each successive purchase by the same customer. Indian railways employ second degree price discrimination as follows
a. Indian railways charge for every kilometre which is brought down as one travels longer and longer. Thus a train ticket for the Rajdhani’s Class-1A between Mangalore to Delhi (Rs 6980) is lesser than the cost of two Class-1A tickets one from Mangalore to Mumbai (Rs 4400) and Mumbai to Delhi (Rs 4755). The price differences are much more than what can be explained by cost, hence this is a case of second degree price discrimination. Mangalore to Delhi Mangalore to Mumbai Mumbai to
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