Price discrimination without market power

Politicians, regulators and antitrust analysts have often used the presence of price discrimination as an indicator of market power. They are often motivated by political pressure from buyers facing the higher of the discriminatory prices to regulate or to pursue antitrust remedies in price-discriminating industries. Their justification for doing so is provided by economic models that equate deviation from marginal cost with market power. Price discrimination can, of course, be used to facilitate and preserve the exercise of market power. But while some price discriminating sellers can earn monopoly rents, price discrimination alone is not evidence of market power and should not be used to justify regulatory intervention.