The pricing of utilities such as gas and electricity as two-part tariffs is an example of ﬁrst-degree price discrimination.

Question

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Two-part tariffs, where pricing includes a fixed fee plus a variable charge based on usage, is an example of second-degree price discrimination, not first-degree. First-degree price discrimination involves charging each customer the maximum they are willing to pay, which is not the case with standard two-part tariffs for utilities.

The Pricing of Utilities Such as Gas and Electricity as Two-Part