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It is designed to enable the firm to capture more consumer surplus than it otherwise would in a non-discriminating pricing environment. Two-part tariffs may also exist in competitive markets when consumers are uncertain about their ultimate demand. Under competition the per-unit price is set below marginal cost.
Besides, what is two part tariffs and how it is determined?
A two-part tariff is a pricing scheme where a producer charges a flat fee for the right to purchase units of a good or service and then charges an additional per-unit price for the good or service itself.
People also ask, why is franchising a two part tariff?
Another way to keep the retail price down is to use two-part tariffs; this allows the franchisor to charge a wholesale price just equal to his (marginal) cost, and to use the franchise fee to appropriate (all or part of) the profits.
Intertemporal price discrimination. The objective of inter-temporal price discrimination is to divide consumers into high-demand and low-demand groups by charging a price that is high at first but falls later.