Two-Part Tariff: Optus Home Phone Plans

2. Two-part tariff: Optus Home Phone plans.

Two-part Tariff pricing technique is a form of price discrimination used by a firm or industry that charges its consumers both an entry and usage fee. Optus charges its consumers a lump fee of $22 for home phone plans each month, for each unit price is 30 cents per local call or 28 cents per minute of standard national calls plus a connection fee of 52 cents (Optus 2017). Optus has market power as these phone plans are lock-in contracts for twenty-four months and consumers would be facing two hundred dollar fee if they wish to break the contracts (Optus 2017). With two-part tariff pricing technique, the consumer surplus would be converted to producer surplus which the firm would charge as the lump sum fee and the price as the unit fee (see graph).

Third-degree price discrimination: Optus mobile plans.

Third-degree price discrimination is when a firm or industry divide their consumers into different groups and charge them with different prices. Optus offers student discounts on their Sim Only plans, it divides its consumers into two groups: students and non-students (Optus 2017). In order

Apple sold iPhone 7 (32GB) at 1079 Australian dollars when it was released in 2016 (Reilly & Lancaster 2016). Now after Apple released iPhone 8, the iPhone 7 is now discounted to 849 Australian dollars (Apple 2017). This pricing strategy is to sell consumers with inelastic demand curves with initial high prices. These consumers are those who love the products and unwilling to wait any longer (shown as D1 on the graph). After they bought the products, then the firm is to lower the price, to capture the consumers with more elastic demand. They are unwilling to pay for the products if the prices are too high, (shown as D2 on the