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Complex pricing and consumer-side attention

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  • Fischer-Thöne, Christian
  • Rasch, Alexander
  • Wenzel, Tobias

Abstract

This paper analyzes a market in which two horizontally differentiated firms compete by setting menus of two-part tariffs, and some consumers are not informed about the linear per-unit price component. We consider two regulatory interventions that limit firms' ability to price discriminate: (i) diminishing the range of contracts by reducing the number of two-part tariffs offered (which prohibits inter-group price discrimination); and (ii) reducing tariff complexity by abolishing linear fees (which prohibits inter-group and intra-group price discrimination). We characterize the effects of these interventions on firm profits and consumer welfare, and we identify conditions for the optimal regulatory policy. Our results provide insights for the evaluation of policy interventions.

Suggested Citation

  • Fischer-Thöne, Christian & Rasch, Alexander & Wenzel, Tobias, 2025. "Complex pricing and consumer-side attention," International Journal of Industrial Organization, Elsevier, vol. 99(C).
    • Handle: RePEc:eee:indorg:v:99:y:2025:i:c:s0167718725000098
    DOI: 10.1016/j.ijindorg.2025.103142
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    References listed on IDEAS

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    More about this item

    Keywords

    Two-part tariffs; Consumer attention; Regulation;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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