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A '''two-part tariff''' is a [[price discrimination]] technique in which the price of a [[product (business)|product]] or [[Service (economics)|service]] is composed of two parts - a lump-sum fee as well as a per-unit charge. In general, price discrimination techniques only occur in partially or fully [[monopoly|monopolistic]] [[market (economics)|market]]s. It is designed to enable the firm to capture more [[consumer surplus]] than it otherwise would in a non-discriminating pricing environment. Two-part tariffs may also exist in [[Competition (economics)|competitive markets]] when consumers are uncertain about their ultimate demand. Health club consumers, for example, may be uncertain about their level of future commitment to an exercise regime.
Depending on the homogeneity of demand, the lump-sum fee charged varies, but the rational firm will set the per unit charge '''above or equal to''' the [[marginal cost]] of production, and '''below or equal to''' the price the firm would charge in a [[Monopoly#Monopolistic pricing|perfect monopoly]]. Under [[Competition (economics)|competition]] the per-unit price is set below marginal cost.<ref>Hayes, B. (1987), p. 42.</ref>
An important element to remember concerning two-part tariffs is that it is still price discrimination, of which an important feature is that the product or service offered by the firm must be identical to all consumers, hence, price charged may vary, but ''not due to different costs borne by the firm'', as this would infer a [[Differentiation (marketing)|differentiated]] product. Thus, while credit cards which charge an annual fee plus a per-transaction fee is a good example of a two-part tariff, a fixed fee charged by a car rental company in addition to a per-kilometre fuel fee is not so good, because the fixed fee may reflect fixed costs such as registration and insurance which the firm must recoup in this manner. This can make the identification of two-part tariffs difficult.
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* landline telephones where there is a fee to use the service ('line rental') and also a fee per call. The line rental covers the cost of providing the service, the per minute charge covers the cost of placing the call on the network.
* [[personal seat license|personal seat licenses]] in professional sports, in which fans of a team pay an up-front lump sum fee for the right to purchase tickets at face value
==Notes==
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==References==
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