Under what conditions can a firm sell the same product at different prices?

Firms practice price discrimination when firms sell the same product at different prices. Price discrimination involves charging higher prices to less price sensitive consumer and lower prices to more price sensitive customers. Price discrimination can only occur in market where the firms has a degree of market power. Firms with monoploy power are price setters, however they might not be able to set any price as their customers might not be able to afford it. Therefore, the firm can decide to sell the same product to different consumers at different prices. This way, the firm can therefore mitigate the loss from the consumers who charged the low price by selling to consumers who can therefore afford the high price. There are three degree of price discrimination, first degree, second degree and third degree price discrimination.