Answer:
Advantages of Price Discrimination
1. Firm will be able to increase revenue. This may enable some firms to stay in
business who may have otherwise have made a loss. E.g. train companies need
price discrimination to offer off peak travel
2. Increased revenue can be used for Research and Development
3. Some Consumers will benefit from lower fares. E.G. old people can take
advantage of cheaper fares on trains.
Disadvantages of Price Discrimination
1. Some Consumers will face higher prices, leading to allocative inefficient
and a loss of consumer surplus.
2. Often those who benefit from lower prices may not be the poorest. For
example some old people may be quite rich, but unemployed will have to
pay the full adult fare.
3. There may be administration costs involved in separating the markets