tag:blogger.com,1999:blog-7565372830978560947.post3808738450576471319..comments2024-01-29T23:18:36.413+13:00Comments on Sex, Drugs and Economics: Why two-part pricing doesn't work for heterogeneous demandMichael Cameronhttp://www.blogger.com/profile/03901095087438726552noreply@blogger.comBlogger5125tag:blogger.com,1999:blog-7565372830978560947.post-19322837534857473212017-06-12T21:10:37.575+12:002017-06-12T21:10:37.575+12:00The up-front fee is represented by an area on the ...The up-front fee is represented by an area on the market graph, not a single price. So, the optimal fee is the whole area AEF (not the single price at A). They can achieve that fee and maximise profits by also setting the price per-unit at Ps.Michael Cameronhttps://www.blogger.com/profile/03901095087438726552noreply@blogger.comtag:blogger.com,1999:blog-7565372830978560947.post-27323285709819709892017-06-12T20:55:30.648+12:002017-06-12T20:55:30.648+12:00'Profitability is all about creating and captu...'Profitability is all about creating and capturing value. So, if the firm can create more value (by increasing the consumer surplus)' --- in the first part of pricing, if we set the up front fee at point A, we have maximise the producer surplus(there is no consumer surplus) . In order to maximise the profit we set second part of price at Ps which give Qs, at Ps we maximise the consumer surplus( as we already capture the max producer surplus at first part of pricing A) , with two part pricing both consumer and producer are happy. Dose this make sense? Anonymoushttps://www.blogger.com/profile/08842229953656459638noreply@blogger.comtag:blogger.com,1999:blog-7565372830978560947.post-48975670766028750502016-06-01T21:12:26.039+12:002016-06-01T21:12:26.039+12:00So, in this case the up-front fee with the price-p...So, in this case the up-front fee with the price-per-unit at PM is the area ABC. But if they lower the price-per-unit to PS, they can increase the up-front fee to the area AEF.Michael Cameronhttps://www.blogger.com/profile/03901095087438726552noreply@blogger.comtag:blogger.com,1999:blog-7565372830978560947.post-32157952960939153242016-06-01T21:11:11.882+12:002016-06-01T21:11:11.882+12:00The most that the firm can charge as an up-front f...The most that the firm can charge as an up-front fee (and the consumers remain willing to buy) is the area of consumer surplus. So the up-front fee is an area on the graph, not a price on the price axis.<br />Michael Cameronhttps://www.blogger.com/profile/03901095087438726552noreply@blogger.comtag:blogger.com,1999:blog-7565372830978560947.post-40808256469813847842016-06-01T20:03:07.129+12:002016-06-01T20:03:07.129+12:00The prices can be plotted on the standard monopoly...The prices can be plotted on the standard monopoly graph right? the price where mc=mr for up front price and mc for price per unitAnonymoushttps://www.blogger.com/profile/05467356979540893633noreply@blogger.com