Managerial Economics and Strategy, 2/e

10.5 Two-Part Pricing

We now turn to another form of nonuniform pricing, two-part pricing. It is similar to nonlinear price discrimination in that the average price per unit paid by a consumer varies with the number of units purchased by that consumer.

With two-part pricing, the firm charges each consumer a lump-sum access fee for the right to buy as many units of the good as the consumer wants at a per-unit price.15 Thus, a consumer’s overall expenditure for amount q consists of two parts: an access fee, A and a per-unit price, p. Therefore, expenditure is $E=A+pq.$ [&E|=|A|+|pq.&]16 Because of the access fee, the average amount per unit that consumers pay is greater if they buy a small number of units than if they buy a larger number.

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