Question

What is price discrimination? Is it legal? Under what conditions can sellers engage in price discrimination?

Answer 1

The most basic definition of price discrimination is the act of charging the same products for different prices. The goal is to capture consumer surplus (the money left on the table by paying a fixed price when some consumers are willing to pay more) and to optimize the region under the demand curve (i.e. income). Price discrimination is illegal if it is performed on the basis of race, religion, nationality or gender or if it is in violation of antitrust or price-fixing legislation. The Robinson-Patman Act addresses discriminatory pricing anticompetitive effects but the online market is highly competitive and those effects are unlikely to occur.

Price discrimination arises when a company charges a different price for an equivalent good or service to different groups of customers, for purposes not related to the cost of production.