Question

What conditions are necessary if a firm wishes to engage in perfect/first-degree price discrimination?

Answer 1

A firm price discriminates by selling goods at different prices to different customers based on their willingness and ability to pay.

In order to successfully price discriminate or to engage in a perfect/first degree price discrimination, a firm must follow certain necessary conditions, which are:

The firmsm be able to differentiate its customers based on their elasticities of demand.

It must be able to determine its own price based on their customers demand
and act as price makers.

The firms must have the ability to control the supply of their own goods and services.

They must have the ability to prevent the resale of their goods by their customers to other customers or businesses.