Intertemporal Price Discrimination and Peak-Load Pricing
4 years ago
Microeconomics
Intertemporal price discrimination – Practice of separating consumers with different demand functions into different groups by charging different prices at different points in time.
Peak-load pricing – Practice of charging higher prices during peak periods when capacity constraints cause marginal costs to be high.
Two-part tariff – Form of pricing in which consumers are charged both an entry and a usage fee.
- Single consumer: Usage fee should be set equal to MC and entry fee equal to the consumer surplus for each customers.
- Two consumers: Set the usage fee above MC and then set entry fee equal to the remaining consumer surplus of the consumer with the smaller demand.
- More consumers: A lower entry fee means more entrants and more sale However, as entry fee becomes smaller and the nr. Of entrants larger, the profit derived from entry fee falls.
Bijay Satyal
Dec 1, 2021