Full Answer Section

1. The seller must be able to prevent resale. The seller must prevent customers from reselling the product to other customers at a higher price. This can be done by using physical barriers, such as time-limited access to a product, or by using legal restrictions, such as copyright or patent protection.
2. The seller must have market power. The seller must have enough market power to charge different prices without losing too many customers. This means that the seller must have a significant share of the market and that there must be few substitutes for the product.

Justification:

The conditions that must be present for price discrimination to occur are all necessary to ensure that the seller can profit from price discrimination. If the seller cannot identify different customer groups, they will not be able to charge different prices. If the seller cannot prevent resale, they will not be able to capture the full consumer surplus. And if the seller does not have market power, they will not be able to charge different prices without losing too many customers.

Price discrimination can be a controversial practice, as it can lead to some customers paying more for a product than others. However, it can also be a beneficial practice, as it can help to increase efficiency in the market. For example, price discrimination can be used to target discounts to customers who are more price-sensitive, which can help to reduce waste.