As consumers, we are familiar with price discrimination because we experience it every day and every time we buy an airline ticket, pay for a restaurant meal, check into a hotel, or buy an appliance. We may even understand why prices vary across consumer groups, between geographic regions, and over time. But what is less evident, and just as commonplace, is the fact that differential pricing is frequently used by manufacturers who generally sell their products to distributors or retailers and not directly to consumers. The justification for the differential pricing of these intermediate goods is less obvious but important to understand because these issues are frequently the subject of Robinson-Patman litigation.

In this chapter from Economics of Antitrust: New Issues, Questions, and Insights, NERA Senior Vice President Dr. Alan Cox explains the benefits that often result from price discrimination and the fundamental efficiencies that motivate many firms to price differentially in the first place. The procompetitive benefits are often overlooked because there is a tendency to focus on the conventional defenses for price discrimination—meeting competition and cost justification. As Dr. Cox points out, this interpretation of the Robinson-Patman Act gives little scope for the benefits to be considered as a defense, which is why the Act could lead to litigation over practices that do not harm competition.