Talk:Two-part tariff

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Price Below Marginal Cost[edit]

I restored the price below marginal cost because that was proven analytically in the Hayes article. The firm would not go out of business because it is pricing according to a two-part tariff. When the membership cost is included in the calculation, total revenue will still be at least as great as total cost. You effectively have two different types of marginal cost. Tobydavid (talk) 14:49, 3 March 2009 (UTC)[reply]

He or she?[edit]

I was interested to see that on 17 May 2007 an unsigned user decided to change my use of 'she' in the "A two-part tariff when consumer demand is homogeneous" to 'he'. I am not going to change it back, as it is a moot point, but surprising nonetheless. Is there a wikipedia policy on which gender to use, I wonder? =) -Narxysus 08:15, 11 August 2007 (UTC)[reply]

Rewrite of article[edit]

I rewrote this entire article, because it was not entirely correct, nor very clear in it's previous form. Hopefully the diagrams make it easier to understand. The article still, I think, needs an explanation of why the firm will not price above the monopoly price MC=MR point (and why it might price below), as well as as an explanation as to what might happen if demand is very similar or radically different (i.e. the respective sizes of the per unit and lump sum fees). I do plan to attempt this at some stage. Also, some good examples of two-part tariffs would help. There were some on the previous version of the article, but I think most of them were debateable, with the exception of the credit card example, which I have included. If anyone is interested, I created the diagrams in Inkspace. Narxysus 06:07, 3 February 2006 (UTC)[reply]

I notice someone restored the examples that existed previously. This created repeated information, so I located them lower down. I do not think it is wise to present examples so early in the article, when they could be debated. For example, the amusement park item - I think in these cases the firm could charge these fees to recoup such costs as public liability insurance and the like, rather than to price-discriminate. The reader should form their ideas of the two-part tariff based on a thorough explanation of it, rather than some arbitrary examples. Narxysus 16:47, 3 February 2006 (UTC)[reply]

Fundamental misconception[edit]

There is a fundamental misconception in this article that should be corrected. In fact, a two-part tariff is not necessarily a form of price discrimination. The usual illustration, the theme park, shows this ... the firm simply charges a two-part price to capture more surplus, but in no way discriminates amongst consumers. So the two-part tariff is simply a more complex pricing scheme than the normal one-part price.

It is true that two-part tariffs are often used in order to price discriminate, for example, when phone companies offer different plans that involve different fixed monthly fees for different levels of service. But the presence of multiple plans is an essential signal that discrimination is taking place (in this case, of the second degree). A single two-part tariff, offered to all consumers, involves no price discrimination.

I would therefore change the opening sentence of the article to: "A two-part tariff is a pricing technique in which the price of a product or service is composed of two parts - a lump-sum fee as well as a per-unit charge." and then alter the rest of the article accordingly. Rani nurmai (talk) 06:40, 24 February 2012 (UTC)[reply]

I would argue that it is a form of price discrimination, since a different price is charged for the same good to different people. For example, with a theme park that charges a $4 entrance fee and a $2 per ride fee, if person A rides two rides, A is charged $8 or $4/ride, and person B who rides 4 rides is charged $12 or $3/ride, so different people are being charged different amounts per ride. See also Price_discrimination#Second_degree_price_discrimination. Jrincayc (talk) 17:22, 24 February 2012 (UTC)[reply]

I disagree. One of the key features of second degree price discrimination is that the different price schedules are used to sort people into different types (say, high-demand versus low-demand) and thereby capture more of each type's surplus. None of that is happening in the two-part tariff theme park example. For price discrimination to occur in your example, the theme park would have to offer different packages ... $8 for 2 rides, $12 for 3 rides, etc.Rani nurmai (talk) 00:43, 25 February 2012 (UTC)[reply]

PS: Take a look at the Palgrave definition of a two-part tariff: http://www.dictionaryofeconomics.com/article?id=pde2011_T000188. As they point out, a two-part tariff is a pricing scheme that can be used for price discrimination, exactly what I had pointed out in my original objection.Rani nurmai (talk) 00:50, 25 February 2012 (UTC)[reply]

So do we agree that if a theme park charged $6 for 1 ride, $8 for 2 rides, $10 for 3 rides, $12 for 4 rides and so forth, it would be price discrimination? Jrincayc (talk) 13:08, 27 February 2012 (UTC)[reply]

There is no misconception here, a two-part tariff is indeed a form of price discrimination. The difficulty of the previous poster to see this stems from the fact that he considers attributes of a given product as separate products whereas from a pricing point of view, this is not the case. Take the example of a night club charging a cover charge of $10 and $2 for every drink purchased. One should not look at these as two products but rather they should be considered a single product. Call it "a night out". Now, for a customer who enters the club and does not purchase drinks, the price of the night out is $10, the cover charge. For a customer who buys 2 drinks, the price of the night out is $14. For yet another customer who purchases 5 drinks, the price is $20. Now, the club owner has charged 3 different prices to 3 different customers, the definition of price discrimination. The club owner could have set a flat price, say $14 for the product. What is the implication of this? She (the club owner) may have lost the first customer if his maximum willingness to pay was $10. On the other hand, customer 3 was willing to dish out $20 for the product, but he is charged $14, implying lost revenue. A two-part tariff enables the club owner to attract customer 1 who is only willing to pay $10 as well as not lose extra revenue from customer 3 who has a higher willingness to pay.

Demand-Curve more of a Marginal Purchase Price curve[edit]

I find it very confusing, because the interpretation of the demand curve here differs fundamentally from the demand curve of the total market. The demand curve of the total market is read like "how many units will be purchased at a certain price", while the demand curve here is to be read like "what has the price of an additional unit to be so that the consumer will buy this additional unit". So it is not the "demand" but actually more the "marginal demand" or "marginal purchase price". This fundamental interpretation difference should be pointed out in the text Silverchecker301 (talk) 21:34, 3 May 2014 (UTC)[reply]