MY POST> Conditions for Price Discrimination
Price discrimination is a technique in which an entity sets various prices for its products and services for the consumers in order to generate more income. The firm charges each purchaser the maximum price based on what they think the purchaser will agree to pay for a given service or good (Depoorter and Meurer, 2018). The purpose of this paper is to discuss the conditions that have to be met for a successful price discrimination.
Firstly, the firm should ensure there is no resale of the goods from on purchaser to another. This is to prevent instances where customers purchase products at a lower price and resell them at a higher price to other customers thus making a profit. In such cases, the re-sale could take many forms such as shops dealing with second hand items, airline companies that re-sale air tickets which make profits on capitalizing on such arbitrages.
Another key condition is the existence of an imperfect competition market. In this kind of market there are several firms offering dissimilar services or goods. Price discrimination is possible in this kind of market because firms set their prices and therefore they have control on the prices and the consumers have asymmetric information. There has to be some degree of monopoly since the producers in the imperfect competition market are price setters and not price takers. The firms also control the supply of goods and services to the market.
Finally, various market segments must be identified for price discrimination to happen. These are identifiable group of families, individuals, firms and businesses that share various characteristics that are homogenous in nature. According to Cowan (2016), this enables producers to charge consumers different prices depending on their reaction to the price changes. This is because different clients have varied demand elasticity thus possible to price discriminate.
Cowan, S. (2016). Welfare?increasing third?degree price discrimination. The RAND Journal of Economics, 47(2), 326-340.
Depoorter, B., & Meurer, M. J. (2018). Price Discrimination & Intellectual Property. UC Hastings Research Paper, (303), 18-26.
I need to reply to these two classmates regarding my post
You presented several valid points in your post. Can you discuss whether or not price discrimination is possible in healthcare markets such as in a place like Houston, TX whereby multiple healthcare organizations are all in the same area?
Reading through your information on price discrimination it reminded me of the price transparency complaints in healthcare. I have read many articles on the variation in cost of the same procedure at different locations. A good example is the cost of an MRI in New Hampshire, there can be up to a 70 percent difference in price (Palmer, 2014). Do you think this is due to price discrimination? or are there more factors than that?
Palmer, J. (2014, September 24). Cost Variation: Why does the same medical procedure vary in cost? Retrieved from