Price discrimination occurs when firms sell the same PRODUCTs to different customers at different prices. Some forms of legal price discrimination are widely practiced in U.S. markets and based on economic logic. However, price discrimination is illegal when it is used to reduce or eliminate COMPETITION. The economic basis for price discrimination is differences in elasticities of demand among consumer groups. ELASTICITY OF DEMAND concerns consumers’ sensitivity or responsiveness to price changes. Movie-theater pricing provides an example of price discrimination based on elasticity of demand. In most situations, such as when one can vote or drink alcohol, a person becomes an adult at age 18 or 21. At movie theaters, however, adulthood is achieved at 12 or 15, the age at which one must pay the adult price (usually 50 percent or more than the youth price). Since teenagers are sociable but still too young to drive, they provide a major market segment for movie theater operators. Recognizing that teenagers have few options and therefore are likely to go to the movies even if prices are raised, theaters will charge teenagers adult prices. Similarly, many theaters charge a lower price to senior citizens, who have more alternative entertainment options, do not need outings to the movies as an excuse to get out of their homes, and are therefore more sensitive to movie-theater prices. Charging teenagers higher prices and seniors lower prices is practicing price discrimination based on differences in their elasticity of demand. This type of price discrimination works if the firm can prevent ARBITRAGE, buying products at lower prices lower in one market and selling at higher prices in another market. In 2000, drug companies began selling and giving away anti-AIDS vaccines in developing countries while charging significantly higher prices in the United States. Although this practice is partly based on humanitarian needs, it is also based on the difference in elasticity of demand in developing versus industrialized countries. One of the drug companies’ fears is that medications sold or given away in EMERGING MARKETS will be resold in markets where they are charging higher prices. Price discrimination when used to drive smaller competitors out of the marketplace was made illegal under the CLAYTON ANTITRUST ACT (1914). During the American Industrial Revolution, large companies would frequently reduce their prices in targeted markets, eliminating competitors and becoming monopolists. Section 2 of the Clayton Act was designed to address this primary (first-line) price discrimination. In the 1930s Congress passed the ROBINSON-PATMAN ACT (1936) in response to complaints that chain stores used their size to gain lower prices and other special arrangements from manufacturers that were not available to small retailers. The act outlawed price discrimination based on favoring particular buyers; secondary price discrimination; and tertiary discrimination, injury to competitors of favored buyers (i.e., a WHOLESALER receiving discriminatorily low prices from a manufacturer and then passing the saving on to its retailers, enabling them to undersell their competitors). Since its enactment, the Robinson-Patman Act has been criticized and challenged. Critics state the act reduces rather than increases competition by limiting pricing options. Government enforcement of the act has varied over the years. In a widely watched case during the 1990s, Wal-Mart was accused of price discrimination by smalltown merchants but was found not guilty.