<p>Here's an easy example: movie theaters.</p>

<p>If you view theater pricing models as a two-part tariff (ticket + snacks) then any time there's a "seniors discount" or something like it, this would fit your strategy.  It's a simple exercise to determine the conditions for profitability of such a campaign, but the fact that they've been around forever suggests that on net, they are.</p>

CC BY-SA 4.0
2019-10-21T14:50:31.507Z
I usually don't buy popcorn when watching a movie, but I guess that if we apply the idea to an entrance fee and a cost per ride, at the same time having price discrimination for the elderly, then this model works. I have two questions though. First, would we discriminate for the elderly both in the entrance fee AND in the per ride fee? Or is that type of discrimination called something else? Second, you said that it is a simple exercise to determine the conditions for profitability, but I am lost. Can you help me get started?
Yejin
CC BY-SA 4.0
2019-10-21T15:05:54.613Z
Well, you can always pay to get into Disneyland and then ride no rides.
heh
CC BY-SA 4.0
2019-10-21T15:06:43.250Z
To your first question, it's not required.  Given your question, all we need is a two-part tariff and some form of consumer class-based price discrimination.  This would be present whether the class-based discrimination was on the entry fee, the per-use fee, or both.
heh
CC BY-SA 4.0
2019-10-21T15:07:46.397Z
Second question:  that might be difficult for me to do here.  What level are you coming at this concept from?  Are you just seeing price discrimination for the first time?
heh
CC BY-SA 4.0
2019-10-22T00:31:46.007Z
I didn't take that many undergrad econ courses (didn't take IO), but I did take graduate micro with MWG last semester.
Yejin
CC BY-SA 4.0
2019-10-24T15:34:03.427Z
It would probably be tough to make up for the lack of IO in a reasonable amount of space.  But if you're familiar with a textbook example of both 3rd-degree price discrimination and two-part tariffs, begin with a 3rd-degree problem and in place of the class-based pricing, insert a two-part tariff.  It should basically look like the simultaneous solving of multiple two-part tariff problems subject to one firm's constraints.
heh
CC BY-SA 4.0
2019-10-21T14:28:12.857Z
2019-10-21T14:28:12.857Z
heh
<p>Of course, I am only interested in instances where the combination of the two strategies ultimately lead to higher profits than if the monopolistic firm had used only one.</p>

<industrial-organisation><price-discrimination>
Are there examples of strategies where a combination of third degree pricing and two-part tariffs are used together?
Yejin
# Are there examples of strategies where a combination of third degree pricing and two-part tariffs are used together?

(Asked by: username_0 on 2019-10-21)

Of course, I am only interested in instances where the combination of the two strategies ultimately lead to higher profits than if the monopolistic firm had used only one.

**Tags:** industrial-organisation, price-discrimination


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## 1 answers

### Answer by username_1 on 2019-10-21. Score: 0 | Accepted answer

Here's an easy example: movie theaters.

If you view theater pricing models as a two-part tariff (ticket + snacks) then any time there's a "seniors discount" or something like it, this would fit your strategy. It's a simple exercise to determine the conditions for profitability of such a campaign, but the fact that they've been around forever suggests that on net, they are.

> **Comments:**
> **username_0**: I usually don't buy popcorn when watching a movie, but I guess that if we apply the idea to an entrance fee and a cost per ride, at the same time having price discrimination for the elderly, then this model works. I have two questions though. First, would we discriminate for the elderly both in the entrance fee AND in the per ride fee? Or is that type of discrimination called something else? Second, you said that it is a simple exercise to determine the conditions for profitability, but I am lost. Can you help me get started?  
> **username_1**: Well, you can always pay to get into Disneyland and then ride no rides.  
> **username_1**: To your first question, it's not required.  Given your question, all we need is a two-part tariff and some form of consumer class-based price discrimination.  This would be present whether the class-based discrimination was on the entry fee, the per-use fee, or both.  
> **username_1**: Second question:  that might be difficult for me to do here.  What level are you coming at this concept from?  Are you just seeing price discrimination for the first time?  
> **username_0**: I didn't take that many undergrad econ courses (didn't take IO), but I did take graduate micro with MWG last semester.  
> **username_1**: It would probably be tough to make up for the lack of IO in a reasonable amount of space.  But if you're familiar with a textbook example of both 3rd-degree price discrimination and two-part tariffs, begin with a 3rd-degree problem and in place of the class-based pricing, insert a two-part tariff.  It should basically look like the simultaneous solving of multiple two-part tariff problems subject to one firm's constraints.  

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