Which of the following firms would be able to price-discriminate most successfully?

• A. A monopoly selling tickets to a concert with strict ID checks
• B. A gas station in a city with many competitors
• C. A firm selling identical products online with no customer information
• D. A perfectly competitive wheat farmer

Answer: (A)

Verified step by step guidance

1. Understand the concept of price discrimination: it occurs when a firm charges different prices to different consumers for the same product, based on their willingness to pay or other characteristics.
2. Identify the necessary conditions for successful price discrimination: (1) the firm must have some market power (i.e., be a price maker), (2) it must be able to segment the market into groups with different price elasticities of demand, and (3) it must prevent or limit resale between groups.
3. Analyze each firm in the problem: a monopoly selling concert tickets with strict ID checks has market power, can segment customers (e.g., by age, student status), and can enforce restrictions to prevent resale, making price discrimination feasible.
4. Consider the gas station in a competitive city: many competitors mean little market power, so it cannot set different prices effectively; price discrimination is unlikely.
5. Evaluate the firm selling identical products online with no customer information: lack of customer data and identical products limit the ability to segment and charge different prices, so price discrimination is difficult.