Why is market power necessary for price discrimination?
A)Market power increases competitive pressures, which facilitates discriminatory pricing.
B)When a seller has market power, his product cannot be resold.
C)Market power allows a seller to control the market demand, and that allows him to set price.
D)Without market power, a seller would lose customers if he tried to charge a higher price.

Question

Quizplus · Accepted Answer

Market power is necessary for price discrimination because it gives a seller the ability to charge different prices to different customers without losing all of them to competitors. If a seller did not have some degree of market power, attempting to charge higher prices to some customers would likely result in those customers turning to competitors, rendering price discrimination ineffective.

Why Is Market Power Necessary for Price Discrimination