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Markets with Consumer Switching Costs and Non-Linear Pricing

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Author Info

  • Gabrielsen, Tommy Staahl

    ()
    (University of Bergen, Department of Economics)

  • Vagstad, Steinar

    ()
    (University of Bergen, Department of Economics)

Abstract

In a non-cooperative oligopoly model where firms use simple linear prices, Klemperer (1987) has shown that the existence of consumers’ switching costs may generate monopoly like prices, and thereby create substantial loss in welfare. We show that when allowing firms to use two-part tariffs, social optimal prices are always set and the size and distribution of switching costs only affect the distribution of surplus between fims and consumers.

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File URL: http://www.uib.no/filearchive/04-02.pdf
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Bibliographic Info

Paper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 04/02.

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Length: 7 pages
Date of creation: 13 Mar 2002
Date of revision:
Handle: RePEc:hhs:bergec:2002_004

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Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
Phone: (+47)55589200
Fax: (+47)55589210
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Web page: http://www.uib.no/econ/en
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Related research

Keywords: switching costs; non-linear pricing; duopoly;

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Cited by:
  1. Gabrielsen, Tommy Staahl & Vagstad, Steinar, 2008. "Why is on-net traffic cheaper than off-net traffic Access markup as a collusive device," European Economic Review, Elsevier, vol. 52(1), pages 99-115, January.

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