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Some people argue that price discrimination should be outlawed since it will lead to some consumers paying a higher price for the product than would be the case if the firm did not discriminate. This means the welfare of consumers (as measured by their consumer surplus) would be reduced. The monopolist on the other hand is able to abuse his market power and gain higher revenue and greater profits and is able to increase his producer surplus at the expense of those with the more inelastic demand.
They also argue that price discrimination is often used by firms to drive competitors out of business. However, price discrimination can benefit society since it leads to some consumers, (those with relatively elastic demand) paying a lower price. In some cases individuals, who would have previously been unable to consume the good, will be priced into the market and would therefore gain welfare, example the high price paid by business users for computer software may allow the IT company to offer the same software to educational users at much lower prices.
It could also be argued that, since the monopoly can sell more goods by discriminating, it will have more scope to exploit economies of scale. These economies of scale could result in lower costs for the firm and therefore lower prices for all customers.
marlinbito answered the question on July 5, 2018 at 15:20
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