Is Price Discrimination Harmful and should be Forbidden? a conceptual and theoretical Analysis

Abstract

This paper attempts to provide a discussion on the ways in which price discrimination affects economic efficiency. The main proposition of competition policy is that perfect competitive markets are efficient and hence price discrimination is harmful. The study reviews the conceptual and theoretical views to identify the different effects of different types of price discrimination on social welfare. The study illustrates how incumbent firms can act to undermine competition in monopolistic market. The study further reveals that price discrimination may be seen as a precondition for efficient pricing and can lead firms to leave consumers with or without surplus than they would enjoy in its absence.

Keywords: Price discrimination; competition policy; efficiency, theoretical