Does Price Discrimination Increase Social Welfare?

Abstract

The process of charging a different price to a different group of consumers for similar goods and services is called price discrimination. The relationship between price discrimination and social welfare has been an important topic of research and discussion for many years. The purpose of the study is to determine the conditions under which price discrimination improves or reduces social welfare. The authors used a method of series of literature reviews to gather information about the relationship between price discrimination and social welfare. The study showed that price discrimination can improve social welfare if output is increased. The increase in output increases social benefits and overcomes the loss of welfare due to the inefficient distribution of products. The key conclusion is that the social benefits of price discrimination are the availability of essential services to low-income groups and the maintenance of equity in the consumption of public goods. This study has major implications for the formulation of a policy that introduces price discrimination to maintain equity among different income groups and ensure the availability of high-cost essential services.