On the Pricing Strategy of a Land Developer

This paper examines the pricing strategy of a developer facing potential clients heterogeneous in income. Two-part pricing and second degree discriminatory pricing strategies are characterized. Our results include the fact that the developer chooses either to charge a positive entry fee and a unit housing price above cost, or 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 upon the ability of the developer to exploit high income consumers