Price discrimination is a rational strategy for a profit-maximizing 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 its customers.

Question

Quizplus · Accepted Answer

Price discrimination is effective when a firm can prevent arbitrage, meaning consumers cannot resell products between segments, allowing the firm to charge different prices to different groups.

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