Explore BrainMass

Necessary condition for price discrimination

Discuss the necessary conditions to make price discrimination work and the best practices to use price discrimination to maximize profits while avoiding price wars. In your discussion make evident the challenges of the strategy even in markets where it is possible.

Solution Preview

Price discrimination is charging different prices to different customers at different times in different markets and these price differences are not due to cost differences.

The necessary conditions for price discrimination are:
1. The firm must have ...

Solution Summary

For price discrimination to work, three condition must be met. They are; firms must have control over prices, the price elasticity of demand must be different over the range of prices and markets or customers must be separable.