To practice third- degree price discrimination, each of these market conditions must be met except which one?
A)The firm must have market power.
B)Different groups of customers with different own price elasticities of demand must exist.
C)No arbitrage opportunities can exist between customer groups.
D)Different groups of customers with equal own price elasticities of demand must exist.

Question

Quizplus · Accepted Answer

The main condition for third-degree price discrimination is the existence of different groups of customers with different own price elasticities of demand. If all groups have equal own price elasticities of demand, there will be no incentive for the firm to charge different prices to different groups. Therefore, option D is not a condition that must be met for practicing third-degree price discrimination.

To Practice Third- Degree Price Discrimination, Each of These Market