Two-Part Tariff

A two-part tariff is a pricing scheme with a fixed entry fee $T$ plus a per-unit price $p$. The total a consumer pays for $Q$ units is $T + pQ$. With full information about a single consumer's demand, the optimal two-part tariff sets $p = MC$ (so consumption is efficient) and $T = CS$ at that price (so the firm captures all consumer surplus) — this is the constructive route to perfect price discrimination. Classic examples: gyms (membership + per-class), amusement parks (entry + ride), Gillette razors (handle + blades).

When to use

Use a two-part tariff whenever a question asks how to capture all consumer surplus from a single known consumer. With multiple consumer types and types unobservable, the two-part tariff becomes the building block for a self-selecting menu under Incentive Compatibility constraints — and the high-type consumer earns Information Rent equal to their consumer surplus on the low-type bundle.