Answer:
A. The Seller Must Prevent Transfer of Sales Between the Groups or Submarkets
Explanation:
There are three degrees of price discrimination as follows:
First Degree - This is the perfect degree, where sellers charge consumers the reservation price for goods.
Second Degree - Sellers divide their consumers into groups called blocks and decide to charge certain blocks at the reservation price for goods.
Third Degree - At this point, sellers divide their consumers into sub-markets, each sub-market has its unique demand curve and sellers try to maximise profit in each sub-market.
Looking at the third degree therefore, if sellers are not able to prevent transfer of sales between submarkets then this price discrimination cannot work. Because Submarket A will be able to interact with Submarket B and this will influence the demand curve and even sales.
For instance, if the seller sells at $2 to Submarket A and at $4 to Submarket B; consumers of Submarket B can easily contact Submarket A and buy for $2.5 and cut off the seller completely. Therefore, the seller must prevent the transfer of sales between the submarkets for this degree of discrimination to work.