336PART FIVEFIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRYPRICE DISCRIMINATIONSo far we have been assuming that the monopoly firm charges the same price to allcustomers. Yet in many cases firms try to sell the same good to different customersfor different prices, even though the costs of producing for the two customers arethe same. This practice is called price discrimination.Before discussing the behavior of a price-discriminating monopolist, weshould note that price discrimination is not possible when a good is sold in a com-petitive market. In a competitive market, there are many firms selling the samegood at the market price. No firm is willing to charge a lower price to any cus-tomer because the firm can sell all it wants at the market price. And if any firmtried to charge a higher price to a customer, that customer would buy from anotherfirm. For a firm to price discriminate, it must have some market power.
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