Doing More with Less: Price Discrimination with Three-Part vs. Two-Part Tariffs

摘要: Multi-part tariffs, such as menus of two-part tariffs and three-part are widely used in industry, especially for pricing information goods, online services, telecommunications products, etc. This paper examines the effectiveness these price structures discriminating between heterogeneous customers. We show that a relatively small menu (3PTs) can be more profitable and, sometimes, socially desirable than larger (more items) (2PTs). Often, single tariff beat multiple tariffs. Moreover, this 3PT has lower hidden costs - it designed with less about consumer preferences, relative to The structure not only produces higher profit, but managerial decision complexity.