Two Part Tariff
The two-part tariff is another form of price discrimination where the producer charges an initial fee then a secondary fee for the use of the product. An example of this is razors, you pay an initial cost for the razor and then pay for the replacement blades. This pricing strategy works because it shifts the demand curve to the right: since you have already paid for the initial blade holder you will buy the blades which are now cheaper than buying a disposable razor.
Read more about this topic: Price Discrimination
Famous quotes containing the words part and/or tariff:
“Remember that you are an actor in a drama, of such a part as it may please the master to assign you, for a long time or for a little as he may choose. And if he will you to take the part of a poor man, or a cripple, or a ruler, or a private citizen, then may you act that part with grace! For to act well the part that is allotted to us, that indeed is ours to do, but to choose it is another’s.”
—Epictetus (c. 55–135 B.C.)
“After so many historical illustrations of the evil effects of abandoning the policy of protection for that of a revenue tariff, we are again confronted by the suggestion that the principle of protection shall be eliminated from our tariff legislation. Have we not had enough of such experiments?”
—Benjamin Harrison (1833–1901)