2. In the articles (posted on D2L) "New Push Ties Cost of Drugs to How Well they Work," by Loftus, and "Pay-For-Performance is No Miracle Cure," by Pauly; the authors make an argument that tying the price of a drug to its effectiveness is a form of price discrimination.

(a) Does this practice meet the conditions required for price discrimination? Why or why not? Please address all conditions one by one.

(b) Pauly concludes that it is highly unlikely that consumers will be better-off as a group if monopolistic pharmaceutical companies practice discriminatory pricing. Analyze this claim using graphs (required) and economic intuition. [Hint: Is the overall market likely to expand when discriminatory pricing takes place, or not?]