Economics Price Discrimination Questions
Two-part pricing is a pricing strategy used in price discrimination where a seller charges customers two separate fees for a product or service. The first fee is a fixed fee, also known as a membership fee or access fee, which allows customers to access the product or service. The second fee is a variable fee, which is charged based on the quantity or usage of the product or service.
This strategy allows the seller to capture additional consumer surplus by charging different prices to different customers based on their willingness to pay. By charging a fixed fee, the seller can extract some of the consumer surplus upfront, while the variable fee ensures that customers who use or consume more of the product or service pay a higher price.
Two-part pricing is commonly used in industries such as health clubs, amusement parks, and software licensing. It allows the seller to increase profits by segmenting the market and capturing additional revenue from customers with higher demand or usage.