Question

Give an example of a two-part tariff with two consumers having different demand equations where you:...

Give an example of a two-part tariff with two consumers having different demand equations where you:

- CANNOT price discriminate (Setting the same two-part price for both consumers)

- Can price discriminate

The answer must include the entry fee, unit price and the total profit. :-)

Homework Answers

Answer #1

Two part tariff is a strategy mainly used in monopolistic market when two different prices are offered for same goods or services. One for the lumpsum amount, other for single piece .

Eg. Amusement parks offer a reduced per ticket price for a group of more people. And higher per ticket price for single individuals or family

1.CAN NOT price discriminate, when two different consumer's arrives which do not access their lumpsum criterion fir example an individual and a family, both will be offered the same price for per unit ticket

2.CAN price discriminate ,when a whole college comes with 600 hundred students then the per ticket charge will be reduced

The entry fee in case 1 would be more then incase to as the Per unit price would be higher but due to the large number of people wanting the ticket in case two, will increase the overall profit of the owner.

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