On the pricing strategy of a land developer

This paper examines the pricing strategy of a developer facing potential cl ients heterogeneous in income. Two-part pricing and second-degree discrimin atory pricing strategies are characterized. Our results include the fact th at the developer chooses either to charge a positive entry fee and a unit h ousing price above cost, or to charge linear pricing of housing, depending on the share of housing in individual consumption as well as on the quality level of public services. Second-degree discriminatory pricing improves up on the ability of the developer to exploit high-income consumers. (C) 1999 Academic Press.