Buffet Pricing

Posted: 30 Mar 1999

See all articles by Babu Nahata

Babu Nahata

University of Louisville - College of Business - Department of Economics

Krzysztof M. Ostaszewski

University of Louisville - Department of Mathematics

Prasanna Sahoo

University of Louisville - Department of Mathematics

Abstract

This article analyzes a commonly used pricing practice, which we call "buffet pricing," in which for a fixed entry fee consumers can consume an unlimited quantity during a specified period of time. When consumers are homogeneous in preferences, this form of pricing can be more profitable than a two-part tariff if the total cost under a two-part tariff is greater than the "net" total cost under buffet pricing. For heterogeneous consumers, depending on the distribution of consumer types and the relative magnitudes of transaction and production costs, buffet pricing can also be more profitable than two-part tariffs.

JEL Classification: L11

Suggested Citation

Nahata, Babu and Ostaszewski, Krzysztof M. and Sahoo, Prasanna, Buffet Pricing. Available at SSRN: https://ssrn.com/abstract=146747

Babu Nahata (Contact Author)

University of Louisville - College of Business - Department of Economics ( email )

Louisville, KY 40292
United States
502-852-4864 (Phone)

Krzysztof M. Ostaszewski

University of Louisville - Department of Mathematics ( email )

Louisville, KY 40292
United States
502-852-6826 (Phone)
502-852-7132 (Fax)

Prasanna Sahoo

University of Louisville - Department of Mathematics ( email )

Louisville, KY 40292
United States

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