The possibility of arbitrage by its customers is loathed by the price discriminating monopolist because:
A)customers enrich themselves at the expense of the monopolist's profits.
B)it is the customers that price discriminate in this case.
C)profits will be lower even though separation of markets. is preserved.
D)it encourages entry.

Question

Quizplus · Accepted Answer

Arbitrage allows customers to purchase goods or services at a lower price in one market and sell them at a higher price in another market. This decreases the monopolist's profits and disrupts their ability to effectively price discriminate between markets. As a result, monopolists want to discourage arbitrage to maintain their pricing power and maximize their profits.

The Possibility of Arbitrage by Its Customers Is Loathed by the Price