Lecture27 - Lecture 27 Two-part tariffs Bundling Two part...

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Lecture 27 Two-part tariffs Bundling
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Two part tariffs Charge a fixed price for service and per-unit charge. How much consumer surplus can a monopolist extract?
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Two-part tariff: one customer Fixed fee T* = entire surplus Per-unit charge P* = MC MC D quantity price P* T*
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Many customers with different demand schedules Charge T1; P=MC Profits = 2*T1 D1 D2 quantity price MC T1
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Many customers with different demand schedules Charge T2; P=MC Profits = T2 D1 D2 quantity price MC T2
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Many customers with different demand schedules Charge T1; P>MC Profits = T1 + (P-MC)Q (note that T1 < consumer surplus of 2 at Q) D1 D2 quantity price MC T1 P Q
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Many customers with different demand schedules Charge T*, price = P* Profits = 2T* + (P*-MC)Q1 + (P*-MC)Q2 D1 D2 quantity price MC P* Q1 Q2 T*
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demand schedules Type “1” versus type “2” customers? All type 1: charge T* = T1
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Lecture27 - Lecture 27 Two-part tariffs Bundling Two part...

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