Department of Economics
College of Business
University of Louisville
Louisville, Kentucky¹
Department of Mathematics
Illinois State University
Normal, Illinois²
Title
Pricing Methods as Tools of Enhancing Welfare of Consumers and of the Society
Synopsis
We discuss various forms of non-standard, i.e., non-linear, pricing methodologies, and their consequences for welfare of the consumers and
the society. We present various non-standard pricing approaches:
– Perfect price discrimination
– Second-degree price discrimination
– Third-degree price discrimination
– Two-part tariff
– Pay-What-You-Want pricing
– Buffet pricing
– Pricing under uncertainty of demand
and compare their effects on the consumers and the overall welfare of the society. We conclude that non-linear pricing practices in fact, are
generally beneficial to consumers and welfare-enhancing for the society.