Editing Price discrimination (section)

== Market power ==
=== Degrees ===
[[Market power]] refers to the ability of a seller to increase price without losing share (sales).<ref name=":22" /> Factors that affect market power include:<ref>{{Cite web |title=Monopoly and competition {{!}} Definition, Structures, Performance, & Facts {{!}} Britannica |url=https://www.britannica.com/topic/monopoly-economics |access-date=2023-04-22 |website=www.britannica.com |language=en}}</ref>

* Number of competitors
* Product differentiation between suppliers
* Entry restrictions

The degree of market power can usually be divided into 4 categories (listed in the table below in order of increasing market power):<ref name=":22" /><ref>{{Cite web |title=Market Power |url=https://corporatefinanceinstitute.com/resources/economics/market-power/ |access-date=2023-04-22 |website=Corporate Finance Institute |language=en-US}}</ref>
{| class="wikitable"
|+Market types
!Type of Market
!Features
!Industry Examples
|-
|Perfect Competition
|
* High competitor volume
* Homogenous goods and services
* No entry restrictions
|Farmers selling vegetables at a market
|-
|Monopolistic Competition
|
* Moderate competitor volume
* Differentiated product
* Low entry restrictions
|Fast food industry
|-
|Oligopoly
|
* Few direct competitors
* Some product differentiation
* Inelastic demand
|Airline industry
|-
|Monopoly
|
* Sole seller
* No substitutes
* Impossible entry (i.e. patents, contracts which prevent entry)
|Utility servicing the region
|}
Since price discrimination is dependent on a seller's market power, monopolies use price discrimination, however, oligopolies can also use price discrimination when the risk of arbitrage and consumers moving to other competitors is low.<ref name=":12" />

=== Oligopolies ===
When the dominant companies in an [[oligopoly]] compete on price, inter-temporal price discrimination (charging a high price initially, then lowering it over time) may be adopted.<ref>{{Cite journal |last1=Dana |first1=James |last2=Williams |first2=Kevin |date=February 2020 |title=Intertemporal Price Discrimination in Sequential Quantity-Price Games |url=http://www.nber.org/papers/w26794.pdf |journal=NBER Working Paper |language=en |location=Cambridge, MA |pages=w26794 |doi=10.3386/w26794 |s2cid=229171191}}</ref>

Price discrimination can lower profits. For instance, when oligopolies offer a lower price to consumers with high price elasticity (lower disposable income) they compete with other sellers to capture the market until a lower profit is retained.<ref name=":52">{{Cite journal |last=Corts |first=Kenneth |date=1998 |title=Third-degree price discrimination in oligopoly: all-out competition and strategic commitment |url=https://www.jstor.org/stable/2555890 |journal=The RAND Journal of Economics |volume=29 |issue=2 |pages=306–323 |jstor=2555890 }}</ref> Hence, oligopolies may opt to not use price discrimination.