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Mixing Goods with Two-Part Tariffs

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Author Info

  • Steffen Hoernig

    () (New University of Lisbon - Faculdade de Economia)

  • Tommaso Valletti

    () (Imperial College London, University of Rome "Tor Vergata" and CEPR)

Abstract

We consider a market where consumers mix content offered by different firms. We show how tariff structures have an impact on firms' profits and efficiency. As compared to pure linear pricing, when firms charge two-part tariffs they make higher profits, while consumers are worse off and the allocation is not first-best since too little mixing occurs. Flat subscription fees make mixing unattractive and are Pareto-dominated by all the other types of tariffs.

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File URL: ftp://www.ceistorvergata.it/repec/rpaper/No-72.pdf
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Bibliographic Info

Paper provided by Tor Vergata University, CEIS in its series CEIS Research Paper with number 72.

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Length: 24
Date of creation: 01 Aug 2006
Date of revision:
Handle: RePEc:rtv:ceisrp:72

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Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
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Web page: http://www.ceistorvergata.it
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Postal: CEIS - Centre for Economic and International Studies - Faculty of Economics - University of Rome "Tor Vergata" - Via Columbia, 2 00133 Roma
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Web: http://www.ceistorvergata.it

Related research

Keywords: Two-part tariffs; flat fees; combinable products; pay-per-view;

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References

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  1. Armstrong, M., 2006. "Recent developments in the economics of price discrimination," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
  2. Jean J. Gabszewicz & Didier Laussel & Nathalie Sonnac, 2004. "Programming and Advertising Competition in the Broadcasting Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(4), pages 657-669, December.
  3. Matutes, Carmen & Regibeau, Pierre, 1992. "Compatibility and Bundling of Complementary Goods in a Duopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 40(1), pages 37-54, March.
  4. Esther Gal-Or & Anthony Dukes, 2003. "Minimum Differentiation in Commercial Media Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 12(3), pages 291-325, 09.
  5. Anderson, Simon P. & Gabszewicz, Jean J., 2006. "The Media and Advertising: A Tale of Two-Sided Markets," Handbook of the Economics of Art and Culture, Elsevier.
  6. Armstrong, Mark, 2006. "Price discrimination," MPRA Paper 4693, University Library of Munich, Germany.
  7. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 949-965, July.
  8. Anderson, S. & Neven, D.J., 1986. "Market efficiency with combinable products," CORE Discussion Papers 1986045, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  9. d'Aspremont, C & Gabszewicz, Jean Jaskold & Thisse, J-F, 1979. "On Hotelling's "Stability in Competition"," Econometrica, Econometric Society, vol. 47(5), pages 1145-50, September.
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Cited by:
  1. Nagler, Matthew, 2006. "Understanding the Internet's relevance to media ownership policy: a model of too many choices," MPRA Paper 2180, University Library of Munich, Germany.
  2. Peitz, Martin & Valletti, Tommaso, 2004. "Content and Advertising in the Media: Pay-TV versus Free-To-Air," CEPR Discussion Papers 4771, C.E.P.R. Discussion Papers.

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