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Two-Part Tariff

   Also found in: Wikipedia 0.01 sec.
Two-Part Tariff
A set fee assessed with a purchase along with a per-unit charge. For example, a credit card carries a two-part tariff if it has an annual fee and a minimum fee with each purchase. A two-part tariff is not necessarily an import tariff.


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With the exception of Ordover and Panzar (1982), the firm setting the two-part tariff in the standard pricing models has either monopsony or monopoly power, and so there are just two elasticities within each pricing equation.
General theory is covered in sections on marginal cost pricing, Ramsey pricing, peak load pricing, pricing under uncertainty, two-part tariffs and nonlinear pricing, and game theoretic approaches.
However, an upstream monopoly can impose a two-part tariff by choosing a franchise fee in such a way that all of the profit is extracted from the downstream firm.
 
 
 
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