Which of the following undermines a firm's ability to engage in price discrimination?
A)the seller's market power
B)the inability to prevent resale of the product from one market segment to another
C)buyers having different elasticities of demand for the product
D)the seller's ability to segment the total market

Question

Quizplus · Accepted Answer

Price discrimination relies on the ability to charge different prices to different groups of consumers based on their willingness to pay. If products can be easily resold from one market segment to another, the price discrimination strategy becomes ineffective as the price differences between the segments will be eroded by arbitrage. The other options do not necessarily undermine a firm's ability to engage in price discrimination. In fact, having market power (option A) and understanding the different elasticities of demand among buyers (option C) can both facilitate price discrimination, while the seller's ability to segment the market (option D) is a necessary condition for price discrimination to even be possible.

Which of the Following Undermines a Firm's Ability to Engage