The question of desirability of price discrimination involves moral judgement. It is beneficial as production under discriminating monopoly is generally more than under simply monopoly. On account of different prices, the monopolist can sell greater quantity of output to more people.
Concessional freight rates for certain low priced and bulky essential commodities like coal help in optimal utilisation of railway space. So long as these rates are high enough to cover the operating costs (variable costs) and make some contribution towards the fixed costs, both the railways and the public gain by discriminatory rates.
If all traffic were to be charged on the basis of the ‘cost of service’ principle, certain classes of traffic will not be forth coming at all, resulting in under utilisation of capacity of the railways. Likewise, the system of charging discriminatory fares under different classes in railways is also in the interest of the poor classes.
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Similarly, the practice of charging a low fee from poor patients and a high fee from rich ones by the doctors may be justified on economical and social grounds. Consequently, the economically weaker sections of the society have access to these essential specialised services.
In the absence of price discrimination, the fees of the doctor may rise beyond the capacity of many patients. Here, since price discrimination raises the total output of the monopolised service and reduces inequalities in the distribution of incomes, it is justified on welfare grounds.
In the words of Joan Robinson, “It may happen, for instance, that a railway would not be built, or a country doctor would not set up in practice, if discrimination were forbidden. It is clearly desirable that price discrimination should be permitted in such cases”.
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Though the monopolist raises his revenues and profits at the cost of consumer surplus, sometimes, it turns out to be the only policy option to carry out production. If the average cost curve happens to lie above the demand curve of the monopolist for each level of output, every single price will imply loss to him.