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Oligopolistic Non-Linear Pricing and Size Economies

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  • Carlo Reggiani

Abstract

The effects of non-linear pricing are determined by the relationship between the demand and the technological structure of the market. This paper focuses on a model in which firms supply a homogeneous product in two different sizes. Information about consumers' reservation prices is incomplete and the production technology is characterized by size economies. Four equilibrium regions are identified depending on the relative intensity of size economies with respect to consumers' evaluation of a second unit of the good. The desirability of non-linear pricing varies across different equilibrium regions.

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Paper provided by Department of Economics, University of York in its series Discussion Papers with number 08/07.

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Date of creation: May 2008
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Handle: RePEc:yor:yorken:08/07

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Keywords: non-linear pricing; size economies; supply technology.;

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  9. De Fraja, Giovanni, 1996. "Product line competition in vertically differentiated markets," International Journal of Industrial Organization, Elsevier, vol. 14(3), pages 389-414, May.
  10. Ekelund, Robert B, Jr, 1970. "Price Discrimination and Product Differentiation in Economic Theory: An Early Analysis," The Quarterly Journal of Economics, MIT Press, vol. 84(2), pages 268-78, May.
  11. David P. Myatt & Justin P. Johnson, 2002. "Multiproduct Quality Competition: Fighting Brands and Product Line Pruning," Economics Series Working Papers 105, University of Oxford, Department of Economics.
  12. Ireland, Norman J, 1991. "Welfare and Non-linear Pricing in a Cournot Oligopoly," Economic Journal, Royal Economic Society, vol. 101(407), pages 949-57, July.
  13. 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.
  14. 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.
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