What do you understand by the two-part tariff in Economics?

Two-part tariff in economics stands for an unconventional pricing technique where a fee is first charged by a business from consumers for its product and then also levies a per unit usage fee. It is generally seen as a system for price discrimination which is used by profit-seeking businesses which try to maximize their total revenue to completely capture any available consumer surplus. E.g. is a club charges its members a membership fee which is standard but at the same time also charges for other basic entry privileges on individual services which are offered by it.

Originally written on September 26, 2023 and last modified on October 27, 2024.
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