Price discrimination is a rational strategy for a profit-maximising firm when
A)it is possible to engage in arbitrage across market segments.
B)it is not possible to segment consumers into identifiable markets.
C)there is no opportunity for arbitrage across market segments.
D)firms want to increase the amount of consumer surplus received by their customers.

Question

Quizplus · Accepted Answer

Price discrimination is effective for a profit-maximizing firm when it can segment markets and prevent arbitrage between them, ensuring different prices can be maintained for different consumer groups without the risk of consumers buying at a lower price in one segment and selling in another.

Price Discrimination Is a Rational Strategy for a Profit-Maximising Firm