What distinct demand problems do two-part tariffs, bundling, and peak pricing solve?
Each instrument extracts surplus or allocates shared capacity differently, so match the model to the constraint.
Follow the cause and effect
For a two-part tariff, set usage price near MC and capture CS with F.
For bundling, compare valuations by item and in total.
For peak load, identify periods when capacity binds.
The model you are using
Conditions for this model
Identical consumers in the tariff example, no other fixed cost, and participation at nonnegative net utility.
The exam trap
Do not set F equal to the firm’s fixed cost automatically; participation willingness limits F.
Connect the reasoning to the graph
What changes
- Demand and MC show the CS used for F; peak pricing overlays time-specific demands on shared capacity.
What stays fixed
Identical consumers in the tariff example, no other fixed cost, and participation at nonnegative net utility.
Keep these conditions throughout the comparison; change only what the case above specifies.
What to inspect
For peak load, identify periods when capacity binds.
Compare before and after, and locate the conclusion on the graph.
5 MINUTES · TRANSFER THE IDEA
Can you explain it without the lesson?
Create two customers whose opposing valuations make pure bundling raise revenue.