Some charge that third-degree price discrimination is unfair or that i

Some charge that third-degree price discrimination is unfair or that it reduces social welfare. Why does charging one group a lower price hurt anyone?

What will be an ideal response?

ANSWER

There’s an equity issue about charging different prices to different people, but the real social welfare issue is not about charging a lower price to one group; it’s about charging a higher price to the other. If the firm charged a single price, it would be somewhere in between the two group prices, in most cases. So some customers who would be able to buy at a lower price in the combined market pay more (or do not buy at all) in the separated market.