Week 2: Price Discrimination - Two-Part Tariff/Tying

Question 1

Tying

Answer 1

a form or price discrimination in which one good, called the base good, is tied to a second good called the variable good
*basic good is typically cheap while the variable good is priced at above marginal cost

Question 2

Tying Example

Answer 2

-printers and ink
-razors and blades
-movie theater ticket and popcorn

Question 3

Explain how HBO used tying

Answer 3

you would originally purchase cable (basic product), then had the premium option to get HBO (variable good- you couldn’t just buy HBO)

Question 4

The Economics of Disneyland and Tying

Answer 4

-before 1982, you had to pay for park admission and each ride (tying)
-in 1982 they switched to just paying for admission but now they are attempting tying again by having the option to pay for front of line access