How do the prices that prevail during price discrimination compare to the price that would exist if the market were charging just one price across all buyers?

In price discrimination, the prices that prevail can be higher or lower than the price that would exist if the market were charging just one price across all buyers. Here's a step-by-step explanation:

1. Price discrimination is a pricing strategy where identical or largely similar goods or services are transacted at different prices by the same provider in different markets or segments. This is possible when the seller has market power and the buyers have different price sensitivities.

2. If the market were charging just one price across all buyers, it would be a single-price market. In this case, the price is determined by the intersection of supply and demand curves.

3. In the case of price discrimination, the seller charges higher prices to buyers who are willing to pay more and lower prices to those who are willing to pay less. This is possible because the seller can segment the market based on certain characteristics of the buyers (like income, age, location etc.) and can prevent resale.

4. Therefore, the prices that prevail during price discrimination can be higher for some buyers (those with higher price sensitivity) and lower for others (those with lower price sensitivity) compared to the single price that would exist if the market were charging just one price across all buyers.

5. The overall effect on social welfare is ambiguous. On one hand, price discrimination can lead to a more efficient allocation of resources, as it allows more transactions to take place. On the other hand, it can lead to a redistribution of surplus from consumers to producers, which may be considered unfair.