In
economics
Economics () is a behavioral science that studies the Production (economics), production, distribution (economics), distribution, and Consumption (economics), consumption of goods and services.
Economics focuses on the behaviour and interac ...
, affine pricing is a situation where buying more than zero of a good gains a fixed benefit or cost, and each purchase after that gains a per-unit benefit or cost.
Calculation
Denoting ''T'' is the total price paid, ''q'' is the quantity in units purchased, ''p'' is a constant price per unit, and ''k'' is the fixed cost, the affine price is then calculated by
.
Jean Tirole
Jean Tirole (born 9 August 1953) is a French economist who is currently a professor of economics at Toulouse 1 Capitole University. He focuses on industrial organization, game theory, banking and finance, and psychology. In particular, he focus ...
, 1988, The Theory of Industrial Organisation, p. 136
In mathematical language, the price is an
affine function
In Euclidean geometry, an affine transformation or affinity (from the Latin, ''wikt:affine, affinis'', "connected with") is a geometric transformation that preserves line (geometry), lines and parallel (geometry), parallelism, but not necessarily ...
(sometimes also
linear function
In mathematics, the term linear function refers to two distinct but related notions:
* In calculus and related areas, a linear function is a function whose graph is a straight line, that is, a polynomial function of degree zero or one. For di ...
) of the quantity bought. An example would be a
cell phone
A mobile phone or cell phone is a portable telephone that allows users to make and receive calls over a radio frequency link while moving within a designated telephone service area, unlike fixed-location phones ( landline phones). This radio ...
contract where a base price is paid each month with a per-minute price for calls.
Sliding-scale price contracts achieve a similar effect, although the terms are stated differently. The price decreases with volume produced, achieving the same financial transfer over time, but the transaction is always based on units sold, with the fixed cost amortized into the price of each unit.
References
External links
Pricing Strategy For Growth Consumer Brands
Pricing
{{econ-stub