Second-degree price discrimination: A graphical and mathematical approach

The authors use a relatively simple diagram accompanied by mathematical analysis to compare two pricing strategies: price-quantity packages and a two-part tariff. This is done both from the monopolist's point of view and from the welfare point of view. The authors show that in the case of two consumer types, the price-quantity packages strategy dominates two-part tariff pricing from the monopolist's point of view. However, social welfare may be higher under two-part tariff pricing.