What is ‘two-part tariff’ in Economics?

  • This refers to an unconventional pricing technique where a business first charges an upfront fee from consumers for its product and later charges them additional fees based on their per unit usage.
  • A club, for instance, might charge its members a standard membership fee for basic entry privileges and then charge additional fees if members choose to use individual services that are offered by it.
  • The two-part tariff system is considered to be a form of price discrimination that is often employed by profit-seeking businesses trying to maximise their total revenue by the means of fully capturing any consumer surplus that may be available.

Source:TH