When is price discrimination possible and profitable?

Answer 1

Price discrimination exists when sales of identical goods or services are transacted at different prices from the same provider.

important condition for profitable price discrimination is that the percentage change in surplus (i.e., consumers' total willingness to pay less the firm's costs) associated with a product upgrade is increasing in consumers' willingness to pay. We refer to this as an increasing percentage differences condition and relate it to many known results

Answer 2

The Price Discrimination is possible and profitable when the monopolist successfully operates the given below conditions :-

1) No Possibility of Resale : A monopolist succeeds in price-discrimination when the product mainly the services, cannot be resold or when the resole of the product can be prevented. A doctor having a monopoly position in a particular locality can charge rich patients high fee but poor patients low fee, for his services rendered. Here he becomes successful because his services cannot be resold. A commodity cannot be resold when it fulfils two important conditions.

(a) Units of its demand cannot be transferred from High-priced to low-priced markets.

(b) Units of its supply cannot be transferred from low-priced to high-priced markets.

2) Seperation of Markets : Price discrimination is also possible when markets are seperated from one another geographically of politically or by tariff-walls in such a way that the buyers of the different markets cannot meet one another for rebuying or the reselling of the products.