Describe who benefits from the price discrimination

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Case: In the ABC town there is one hair saloon, "Style" who is a natural monopoly in the town. The below Table 1 shows the demand schedule (the first 2 columns) and "Style" marginal cost schedule. "Style" has conducted a marketing survey and discovered that it has 4 types of customers each hour. Table2 shows each customers' willingness to pay (WTP) for hair care services. "Style" hair saloon has fixed costs equal to $20. Assume that "Style" salon is a profit maximizer.

For each of the below scenarios, find: the number of haircuts sold; price of haircut; and profit of "Style" salon.

Scenario 1: "Style" saloon does not price discriminate (e.g., "Style" saloon charges same price for all customers);

Scenario 2: "Style" saloon perfectly price discriminate;

Describe who benefits from the price discrimination within "Style" saloon?

Reference no: EM133343923

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