What conditions allow a firm to sell the same product at different prices?

Price discrimination is the sale of identical goods or services transacted at different prices from the same provider. It can only be a feature of a monopolistic market in which market power can be exercised with monopoly firms being able to set prices; they are ‘price makers.’ The monopolist has the ability to sell a product to different buyers for different prices; however, this only works under certain conditions as otherwise the buyers at lower prices could just sell the products on to buyers willing to pay a higher price. A degree of price discrimination is possible when there are market frictions or high fixed costs which make marginal-cost pricing unsustainable in the long run. The conditions in which this occurs are when there are differences in price elasticities of demand for the different groups of buyers and when there are barriers that prevent consumers from switching from one supplier to another. As a result, output for firms can be expanded when price discrimination is efficient, but it can also decline when the discrimination fails to expand sales to low valued users, for example. Price discrimination is only efficient when output is expanded, as even when it stays the same, inefficiency is caused by a miss-allocation of output among consumers.