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Of course, I am only interested in instances where the combination of the two strategies ultimately lead to higher profits than if the monopolistic firm had used only one.

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Here's an easy example: movie theaters.

If you view theater pricing models as a two-part tariff (ticket + snacks) then any time there's a "seniors discount" or something like it, this would fit your strategy. It's a simple exercise to determine the conditions for profitability of such a campaign, but the fact that they've been around forever suggests that on net, they are.

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  • $\begingroup$ I usually don't buy popcorn when watching a movie, but I guess that if we apply the idea to an entrance fee and a cost per ride, at the same time having price discrimination for the elderly, then this model works. I have two questions though. First, would we discriminate for the elderly both in the entrance fee AND in the per ride fee? Or is that type of discrimination called something else? Second, you said that it is a simple exercise to determine the conditions for profitability, but I am lost. Can you help me get started? $\endgroup$ – Yejin Oct 21 at 14:50
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    $\begingroup$ Well, you can always pay to get into Disneyland and then ride no rides. $\endgroup$ – heh Oct 21 at 15:05
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    $\begingroup$ To your first question, it's not required. Given your question, all we need is a two-part tariff and some form of consumer class-based price discrimination. This would be present whether the class-based discrimination was on the entry fee, the per-use fee, or both. $\endgroup$ – heh Oct 21 at 15:06
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    $\begingroup$ Second question: that might be difficult for me to do here. What level are you coming at this concept from? Are you just seeing price discrimination for the first time? $\endgroup$ – heh Oct 21 at 15:07
  • $\begingroup$ I didn't take that many undergrad econ courses (didn't take IO), but I did take graduate micro with MWG last semester. $\endgroup$ – Yejin Oct 22 at 0:31

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