A pricing strategy that requires consumers pay an up-front fee plus an additional fee for each unit of product purchased is a:
A) tying contract.
B) two-part tariff.
C) form of perfect price discrimination.
D) none of these.

Question

Quizplus · Accepted Answer

This pricing strategy is known as a two-part tariff, as it consists of two parts: an up-front fee (or fixed fee) and a per-unit fee (or variable fee). This strategy is commonly used in industries such as utilities or membership-based services, where the fixed fee covers the cost of access or membership, while the per-unit fee covers the actual usage or consumption. This strategy can be effective in increasing revenue and encouraging usage, while also capturing consumer surplus through the up-front fee. Options A and C are incorrect, as they describe different pricing strategies, and option D is incorrect, as there is a specific term for this strategy (two-part tariff).

A Pricing Strategy That Requires Consumers Pay an Up-Front Fee