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Two-part tariff competition in duopoly

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  • Xiangkang Yin

    ()
    (School of Economics, La Trobe University)

Abstract

Built on the location model, this paper studies the rivalry of two firms in an industry through two-part tariffs. It is found that kinky profit functions are responsible for the coincidence of imperfectly competitive equilibrium and cartelization outcome. A duopoly likely results in higher entry fees and industry profits and lower net consumers surplus than a monopoly because each duopolist has a smaller market size than the monopolist. But social welfare in the monopoly is lower than in the duopoly. In comparison with uniform pricing, two-part tariffs tend to have lower prices, more profits and welfare but the magnitude of net consumers surplus is ambiguous.

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File URL: http://www.latrobe.edu.au/__data/assets/pdf_file/0007/130867/2000.11.pdf
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Bibliographic Info

Paper provided by School of Economics, La Trobe University in its series Working Papers with number 2000.11.

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Length: 33 pages
Date of creation: 2000
Date of revision:
Handle: RePEc:trb:wpaper:2000.11

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Web page: http://www.latrobe.edu.au/economics
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Related research

Keywords: Monopoly; Oligopoly; Two-Part Tariff; Cartelization; COMPETITION ; ECONOMIC MODELS;

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References

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  1. repec:ltr:wpaper:2000.11 is not listed on IDEAS
  2. Armstrong, Mark, 1999. "Price Discrimination by a Many-Product Firm," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 151-68, January.
  3. Steven C. Salop, 1979. "Monopolistic Competition with Outside Goods," Bell Journal of Economics, The RAND Corporation, vol. 10(1), pages 141-156, Spring.
  4. ANDERSON, Simon P. & DE PALMA, André & NESTEROV, Yurii, 1994. "Oligopolistic Competition and the Optimal Provision of Products," CORE Discussion Papers 1994034, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  5. Yin, Xiangkang, 2001. "A Model of Shareholder Discounts," The Economic Record, The Economic Society of Australia, vol. 77(236), pages 89-102, March.
  6. Clay, Karen, 1994. "A coasean general equilibrium model of regulation," Journal of Public Economics, Elsevier, vol. 53(3), pages 459-475, March.
  7. Xiangkang Yin, 2000. "Two-part tariff competition in duopoly," Working Papers 2000.11, School of Economics, La Trobe University.
  8. Simon P. Anderson & Andre de Palma, 1998. "From Local to Global Competition," Virginia Economics Online Papers 344, University of Virginia, Department of Economics.
  9. Jean-Charles Rochet & Lars A. Stole, 2002. "Nonlinear Pricing with Random Participation," Review of Economic Studies, Oxford University Press, vol. 69(1), pages 277-311.
  10. Richard Schmalensee, 1981. "Monopolistic Two-Part Pricing Arrangements," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 445-466, Autumn.
  11. Kenneth S. Corts, 1998. "Third-Degree Price Discrimination in Oligopoly: All-Out Competition and Strategic Commitment," RAND Journal of Economics, The RAND Corporation, vol. 29(2), pages 306-323, Summer.
  12. Anderson, Simon P & Engers, Maxim, 1994. "Spatial Competition with Price-Taking Firms," Economica, London School of Economics and Political Science, vol. 61(242), pages 125-36, May.
  13. Phlips,Louis, 1983. "The Economics of Price Discrimination," Cambridge Books, Cambridge University Press, number 9780521283946, April.
  14. Ng, Yew-Kwang & Weisser, Mendel, 1974. "Optimal Pricing with a Budget Constraint-The Case of the Two-part Tariff," Review of Economic Studies, Wiley Blackwell, vol. 41(3), pages 337-45, July.
  15. Ziss, Steffen, 1995. "Vertical Separation and Horizontal Mergers," Journal of Industrial Economics, Wiley Blackwell, vol. 43(1), pages 63-75, March.
  16. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
  17. Varian, Hal R., 1989. "Price discrimination," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 10, pages 597-654 Elsevier.
  18. repec:fth:latrob:00.11 is not listed on IDEAS
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Citations

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Cited by:
  1. Mark Burkey, 2011. "Spatial pricing models with lumpy transportation costs: the case for travel cost subsidization," Letters in Spatial and Resource Sciences, Springer, vol. 4(3), pages 197-206, October.
  2. John Vickers & Mark Armstrong, 2006. "Competitive Nonlinear Pricing and Bundling," Economics Series Working Papers 281, University of Oxford, Department of Economics.
  3. Yin, Xiangkang, 2004. "Two-part tariff competition in duopoly," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 799-820, June.
  4. Xiangkang Yin, 2013. "Two-part tariffs set by a risk-averse monopolist," Journal of Economics, Springer, vol. 109(2), pages 175-192, June.
  5. Robert Somogyi, 2013. "Bertrand-Edgeworth competition with substantial product differentiation," IEHAS Discussion Papers 1332, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  6. Fabian Herweg, 2012. "Relaxing competition through quality differentiation and price discrimination," Journal of Economics, Springer, vol. 106(1), pages 1-26, May.
  7. Calzada, Joan & Valletti, Tommaso, 2005. "Network Competition and Entry Deterrence," CEPR Discussion Papers 5381, C.E.P.R. Discussion Papers.

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