Question

It is argued that perfect price discrimination is efficient. Does this mean that it should be encouraged? Explain why or why not.

Answer 1

perfect price discrimination is the practice of producer to charge price equal to the maximum willingness to pay of the consumer. It charges different price from different consumers until the marginal consumer's willingness to pay is equal to the marginal cost of production. There is entire producer surplus.

Consumer surplus is zero and dead weight loss is also zero. Therefore, perfect price discrimination is efficient.

No, it should not be encouraged because there is no consumer surplus.