Spatial nonlinear pricing with per-trip versus per-unit transportation costs

In this paper, we introduce a nonlinear pricing model with transportation costs that do not vary with the quantity purchased. In contrast to the quantity discounts seen in a model with per-unit transportation charges, we find that the optimal nonlinear pricing schedule takes the form of either a two-part tariff or package pricing, which appears to be consistent with observed pricing structures. We compare efficiency measures between optimal nonlinear pricing and the single price monopoly result, finding that per trip transportation costs can lead to qualitatively different results for pricing structure and efficiency measures.