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Sam Rodrigues’ Tryst with Price Discrimination (B): Single Monopoly vs Price Discrimination

CASELET, MANAGERIAL ECONOMICS
ET Cases, 5 pages

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Sam Rodrigues’ Tryst with Price Discrimination (B): Single Monopoly vs Price Discrimination

 

On December 22nd 2015, 40 years old Sam Rodrigues (Sam), a senior employee at one of the leading Indian IT companies, arrived in Shillong from Hyderabad. Sam was based out of Hyderabad and had come to Shillong on a vacation to spend time with one of his close friends, Dr. Roopesh Saikia (Roopesh).

Roopesh, who was 42 years old, was a successful oncologist based out of Shillong. Sam and Roopesh had been planning for a vacation together for the past 3 years but their plan did not materialize owing to their professional commitments. However, upon continuous pestering from him wife Tina to take care of his health, Sam not only underwent an Executive Health Check-Up at Varun Hospitals and Mary Diagnostic Center (MDC) in Hyderabad, but also decided to go for the long pending holiday with Roopesh. The two close friends had planned to go for adventure sports like trekking and river rafting...................

Teaching Note Preview

Sam Rodrigues’ Tryst with Price Discrimination (B): Single Monopoly vs Price Discrimination

 

Synopsis

These two caselets (Sam Rodrigues’ Tryst with Price Discrimination (A): Degrees of Price Discrimination and Sam Rodrigues’ Tryst with Price Discrimination (B): Single Monopoly vs Price Discrimination) enable a discussion and an understanding on the concept of price discrimination. The discussion is enabled with reference to Sam Rodrigues’ (Sam) – the protagonist of the caselet – experiences with price discrimination. Sam encounters several episodes of price discrimination when he visits Varun Hospitals for a general health checkup and to Mary Diagnostic Center (MDC) to take the recommended diagnostic tests. Through Sam’s experiences, the caselets help understand not just the core concept of price discrimination but also allied concepts such as the types and degrees of price discrimination and comparison between a single monopoly price and price discrimination. It also throws open some relevant economic questions – what are the advantages and disadvantages of price discrimination? What are the conditions under which price discrimination will be possible and profitable? Why is price discrimination more desirable for a monopolist than charging a single monopoly price?

Prerequisite Conceptual Understanding

• Paul A. Samuelson, et al., “Competition among the Few”, Economics, 19th Edition, McGraw Hill Education (India) Private Limited, 2010 – To understand the concept of price discrimination

Case Positioning and Setting

These caselets can be suitably used in:

  • • Managerial Economics course to teach the concept of price discrimination in a monopoly

 

Assignment Questions

I. Taking the example of cancer screening package for men, for how many patients should MDC (the monopolist) conduct tests and at what price, if the  monopolist charges the same price. How much profit will MDC earn at this price?
II. For how many patients should MDC conduct tests if it charges discriminatory prices, dividing the customers into separate groups according to their ability to pay and charging the maximum from each group? How much profit will MDC earn in this case?
III. .......................

Preamble to this Caselet Analysis

The purpose of these two caselets is to introduce the students/participants to the concept of price discrimination (Caselet A) and to distinguish between a single monopoly and price discrimination (Caselet B). The advantages, disadvantages, types and degrees of price discrimination as well as the necessary conditions for price discrimination were discussed in the classroom taking examples from Sam Rodrigues’ story. Further, the comparison between a single monopoly price and price discrimination was also discussed with the help of Caselet (B) facts. The discussion was accordingly orchestrated in the classroom [Exhibit (TN)-I].............

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Product code: ME-2-0018(b), ME-2-0018(b)A

Abstract


This caselet extends the discussion on price discrimination initiated in Caselet (A): “Sam Rodrigues' Tryst with Price Discrimination (A): Degrees of Price Discrimination' It highlights Sam Rodrigues' another encounter with price discrimination when he visits his friend Dr. Roopesh Saikia (Roopesh) - an oncologist by profession - in Shillong, for a vacation. Roopesh shared with Sam his plan of starting a chain of Oncology-focused diagnostic centers in Northeastern India. Roopesh's aim was to spread the popularity of preventive cancer screening packages in the North-East and ease the burden on Mary Diagnostic Centers (MDC) that had a  monopoly in diagnostic services in general and Oncology-related diagnostic tests in particular in the North-East. With reference to pricing at MDC, the caselet enables a discussion on the desirability of price discrimination for a monopolist as against a single monopoly price for all the customers.



Pedagogical Objectives

  • To understand the desirability of policy of price discrimination as against single monopoly price
  • To compare profits for a monopolist under price discrimination as against single monopoly price
  • To discuss the advantages and disadvantages of the policy of price discrimination for a monopolist

Case Positioning and Setting

This caselet can be suitably used in:

  • Managerial Economics course to teach the concept of single monopoly price vs price discrimination




This Case Pack Includes:
- Abstract
- Caselet
- Teaching Note (**ONLY for Academicians)
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