Spatial Monopoly and Spatial Monopolistic Competition With Two-Part Pricing.

This paper develops a model of spatial price discrimination by two-part pricing when sellers cannot discriminate between consumers by bearing freight or by nonlinear pricing. Sellers can be interpreted as clubs with which consumers become members or non-members, The two-pan tariff comprises a membership fee and a price for each time a seller's facility or store is used. When the fixed cost per store is low. a monopolist adopts compulsory memberships and builds stores closer together than is socially optimal. With higher fixed cost, the monopolist offers consumers a choice between membership and non-membership at a higher price, and builds stores too far apart. Nearby consumers become members and the rest non-members. Competition with free entry and costless relocation leads to closer spacing than monopoly. Welfare is lower than under monopoly except at high levels of fixed cost per store. [ABSTRACT FROM AUTHOR]