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Strategic Effects Of Three‐Part Tariffs Under Oligopoly

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  • YONG CHAO

Abstract

The distinct element of a three‐part tariff (3PT), compared with linear pricing (LP) or a two‐part tariff, is its quantity target within which the marginal price is zero. This quantity target instrument enriches the firm's strategy set in dictating the competition to a specific level, even in the absence of a usual price discrimination motive. With general differentiated linear demands, the competitive effect of a 3PT in contrast to LP depends on the degree of substitutability between products: Competition is intensified when two products are more differentiated, yet softened when two products are more substitutable.

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  • Yong Chao, 2013. "Strategic Effects Of Three‐Part Tariffs Under Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(3), pages 977-1015, August.
    • Handle: RePEc:wly:iecrev:v:54:y:2013:i:3:p:977-1015
    DOI: 10.1111/iere.12025
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    Cited by:

    1. Jang, Jaewon & Kwon, Youngsun, 2014. "Growing use of three-part tariffs by MNOs: Understanding incentives of MNOs," 25th European Regional ITS Conference, Brussels 2014 101377, International Telecommunications Society (ITS).
    2. Jianqing Fisher Wu & Banafsheh Behzad, 2023. "Optimal three-part tariff pricing with Spence-Mirrlees reservation prices," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 97(2), pages 233-258, April.

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