Price discrimination is profitable under following facts:

1. Larger Output:

The term discrimination suggests that consumers are exploited in order to increase the profits of the monopolists.

Since price discrimination enables the monopolist to obtain a higher total revenue (and thus higher profits) than if he charges a single price for the whole of his output.

But, this also means that he produces a larger output than with a single price.


He is able to do this because, he is able to separate the markets and he does not charge higher price in one market by selling extra goods in another market. Indeed, if there were different markets for all units of his product (that is, perfect discrimination), the marginal revenue for each unit would have been equal to the price at which it is sold. The monopolist output would then be identical with perfectly competitive output. Hence, the society at large is benefitted, since output under discriminating monopoly is larger than with a single price.

2. Equity:

Under price discrimination, higher prices are charged from the rich people and lower prices are charged from the poor people. It has a redistributive effect. The poor are benefitted at the cost of the rich people. Therefore, inequalities in income and wealth can be reduced through price discrimination. It is because of this reason that the government sometimes permits or even encourage price discrimination, especially when it controls prices in the private sector”.

3. Helpful to Weaker Section:

As a result of price discrimination, the weaker section of the society may be benefitted. For instance, the services of a doctor may be available at cheap rates to the poor when the doctor practices price discrimination by charging higher fees from the rich patients and lower fees from the poor. The railways charges lower rates from class II passengers and higher rates from class I passengers.

Had there been no discrimination, these services would not have been available. This fact has also been emphasized by Mrs. Joan Robinson in the following words, “It may happen for instance, that a railway would not be built or a country doctor would not set up his practice, if discrimination were forbidden.