being generated in the market and thus a more efficient outcome for
society as a whole.
For a monopolist that price discriminates among units, however, there are
several prices rather than just a single price. As you can see in Figure
6 , if the firm sold another block of output beyond Q at a price below
it would increase its profits further (because the new price would still be
above MC). And the more output it produces, the more economic surplus
is generated in the market.
If price discrimination leads the firm to increase total output, the total economic surplus
generated in the market will increase, and the outcome will be more efficient.Price Discrimination and Consumers
The final aspect of price discrimination is its effect on consumers, and this
is where we often witness strong emotional reactions to price
discrimination, and the allegation that it is unfair to consumers. But oneโs
view will depend on who benefits and who loses.
For instance, when railways discriminate against small farmers, the
results arouse public anger. It seems acceptable to many people, however,
that doctors practise price discrimination in countries where medical
services are provided by the market, charging lower prices to poor
patients than to wealthy ones. And few people disapprove when airlines
discriminate by giving senior citizens and vacationers lower fares than
business travellers.
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