Price Discrimination and Market Power

The relationship between price discrimination and market power is clarified by distinguishing between market power as defined in economics in terms of a firm's elasticity of demand and market power as defined in antitrust law in terms of a firm's ability to influence market outcomes. Price discrimination requires a less than perfectly elastic demand and hence implies the existence of some economic market power but is unrelated to the existence of antitrust market power. Once price discrimination is more generally recognized in antitrust law as an element of the normal competitive process, defendants will be more likely to use it as a legitimate business justification