Conditions necessary for Price discrimination.

Price discrimination is possible because of the following conditions.

Difference in elasticities of demand . A higher price will be charged in a market where demand is inelastic and a lower price in a market with elastic demand.

The commodity in question should be sold by a monopolist.

Markets should be separated with a big geographical distance between them. For instance, the monopolist is able to sell and discriminate between home and foreign markets.

The cost of moving commodities from a cheaper market to a market of high price should be very high. This should result from high transport cost and tarrif restrictions.

Product differentiation- Artificial difference made on the same product by way of branding, design, packing etc may make it possible for the monopolist to price discriminate.

Ignorance among buyers- for the same product, different prices can be charged on different buyers because each individual buyer is not in position to know the price being charged on others or the artificial differences created.

Personal services like those offered by doctors, lawyers, teachers, salons, entertainment. These cannot be resold or transferred and therefore favour price discrimination.

On the part of the monopolist, the cost of separating / dividing the markets should be very low. In the case of dumpingĀ  ( selling products in a foreign market cheaply than in the home market to get rid of a surplus), the cost of transport to the foreign market should be low.