Price Discrimination

#topic/econ

Practice of selling the same products to different buyers at different prices
Price discrimination seeks to charge each consumer what they are willing to pay in an effort to increase profits.
Those with Inelastic Demand are charged more than those with elastic demand.

Requires the following conditions:

Must have Monopoly power
Must be able to segregate the market
Consumers must NOT be able to resell product

A perfectly price discriminating monopoly can charge each person differently, so Marginal Revenue (MR) equals demand.

Tip

A price discriminating monopoly results in:

Several prices
More profits
No Consumer Surplus
Higher Socially optimal quantity so no DWL

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