Why do firms engage in price discrimination?
A) to decrease cost
B) to increase profits
C) to increase consumer surplus
D) to prohibit the resale of their products

Question

Quizplus · Accepted Answer

Firms engage in price discrimination to increase profits. By charging different prices to different groups of customers, firms can capture a greater share of consumer surplus and increase revenue. This can be achieved by identifying different groups of consumers with varying demand elasticities and charging them different prices for the same product. This strategy can be especially effective in markets where there is little competition and consumers are willing to pay different prices for the same product.

Why Do Firms Engage in Price Discrimination