When Price Discrimination is Profitable
We have studied above the conditions which make discrimination by a monopolist possible. Now Ict us see when such discrimination becomes profitable. Price discrimination is profitable only if elasticity of demand in one market is different from elasticity of demand in the other. Then the monopolist can go on dividing and sub-dividing his market till no two buyers with different elasticities arc put in the same group. or till in each market the elasticity of demand is the same. The monopolist will find it profitable to charge more in the market where elasticity is low and low price where it is high. To quote Mrs. Robinson. “Thc submarkets will be arranged in ascending order of their elasticities. the highest price being charged in the least clastic market, and the lowest price in the telastic market.’?