Economics Oligopoly Questions
Price discrimination theory in oligopoly refers to the practice of charging different prices to different customers or markets for the same product or service. This strategy is employed by oligopolistic firms to maximize their profits by segmenting the market and extracting the maximum possible consumer surplus. By identifying different customer groups with varying price elasticities of demand, firms can charge higher prices to customers with lower price sensitivity and lower prices to customers with higher price sensitivity. This allows firms to capture a larger share of the market and increase their overall revenue. However, price discrimination can also lead to potential antitrust concerns and may be subject to regulation in some jurisdictions.