Two-Part Tariff Competition With Switching Costs and Sales Agents
AbstractThis paper study the effects of two-part tariff pricing in a competitive environment with differentiated products and switching costs. This is the case of long distance telephone service, where there is a fixed monthly fee and a charge per call. This is also the case for some financial institutions like mutual funds or pension funds. In many of these industries there are also switching costs. In this environment, markets have reacted by hiring sales agents to switch consumers from one firm to another. Without considering sales agents, social welfare is the same under a two-part tariff regime as under single pricing, but the distribution of surplus is different. When sales agents are introduced to the model, they are able to reduce switching costs, and welfare might increase; but they generate over-switching with respect to the social optimum.
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Bibliographic InfoPaper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 162.
Date of creation: Jun 2002
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2002-07-02 (All new papers)
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