Multiproduct Two Part Tariffs

Two part pricing by a multiproduct monopoly and a differentiated oligopoly are examined and compared. Two part pricing policies are seen to depend on whether products are complements or substitutes and on whether or not the market is segmented. A principle result is that although competition tends to lower unit prices, there is no corresponding tendency for competition to reduce entry fees. The unit pricing rule is related to the Ramsey pricing rule. Oligopoly equilibrium unit prices equal marginal cost when there is one consumer type.