Final answer:
The two-part tariff is a pricing strategy that segments customers into high and low volume users through a membership fee followed by a low daily rental fee, which benefits frequent users and maximizes willingness to pay from each segment.
Step-by-step explanation:
The logic of a two-part tariff is to segment the market into high and low volume customers. Under this pricing mechanism, the membership fee serves to filter out casual users and ensures that only those who anticipate significant use of the equipment opt for the plan, thus segmenting customers by usage volume. Once the membership fee is paid, the small daily fee for equipment rental becomes more economical for high usage customers as opposed to paying higher daily rates with no membership.
To illustrate, a farm that requires frequent use of various equipment throughout the year would likely benefit from the two-part tariff as the membership fee would be quickly offset by the lower daily rental rates. Conversely, a farm only needing equipment occasionally may opt for a straight rental fee to avoid the upfront membership cost. Hence, the two-part tariff is effective in categorizing customers based on their anticipated level of use and extracting maximum willingness to pay from each segment.