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Uncertain Consumer Tastes and Two-Part Tariff

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  • Hao Wang

    (China Center for Economic Research)

Abstract

A service provider sells to homogenous risk-averse consumers through a two-part tariff. The consumers have uncertain tastes toward the service. They subscribe the service before the uncertainty resolves. In contrast with the common view that a monpolist's optimal two-part tariff for homogeneous consumers should entail a usuage rate equalising to the firm's marginal production cost, I show that when consumers have uncertain tastes, the service provider's optimal two-part tariff entails a usuage rate that is greater than the marginal cost.

Suggested Citation

  • Hao Wang, 2007. "Uncertain Consumer Tastes and Two-Part Tariff," Microeconomics Working Papers 22714, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:microe:22714
    as

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    File URL: http://www.eaber.org/node/22714
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    References listed on IDEAS

    as
    1. John W. Walsh, 1995. "Flexibility in Consumer Purchasing for Uncertain Future Tastes," Marketing Science, INFORMS, vol. 14(2), pages 148-165.
    2. Belk, Russell W, 1975. "Situational Variables and Consumer Behavior," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 2(3), pages 157-164, December.
    3. Chang, Myong-Hun, 1993. "Flexible Manufacturing, Uncertain Consumer Tastes, and Strategic Entry Deterrence," Journal of Industrial Economics, Wiley Blackwell, vol. 41(1), pages 77-90, March.
    4. Walter Y. Oi, 1971. "A Disneyland Dilemma: Two-Part Tariffs for a Mickey Mouse Monopoly," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 85(1), pages 77-96.
    Full references (including those not matched with items on IDEAS)

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