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Optimal two-part tariffs in a model of discrete choice

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  • DE BORGER; Bruno

Abstract

In this paper we study welfare-optimal two-part tariffs in a model of discrete choice. The determinants of the sign and magnitude of the fixed and variable tax are analysed in terms of the nature and degree of consumer heterogeneity, the price sensitivities of participation probabilities and conditional demands, and the nature of distributional concerns. In the absence of distributional concerns, the model generalises the ‘corrected’ Ramsey rule for the variable tax and it shows that, in the absence of collection or fixed participation costs, the fixed fee may be negative. The conditions that determine the sign of the participation fee turn out to have an intuitive economic interpretation. Finally, the implications of distributional concerns for the optimal fixed and variable taxes are analysed.

Suggested Citation

  • DE BORGER; Bruno, "undated". "Optimal two-part tariffs in a model of discrete choice," Working Papers 1999005, University of Antwerp, Faculty of Business and Economics.
    • Handle: RePEc:ant:wpaper:1999005
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    Cited by:

    1. is not listed on IDEAS
    2. Carmona, Miguel, 2010. "The regulatory function in public-private partnerships for the provision of transport infrastructure," Research in Transportation Economics, Elsevier, vol. 30(1), pages 110-125.
    3. Stefano Bortolomiol & Virginie Lurkin & Michel Bierlaire, 2022. "Price-based regulation of oligopolistic markets under discrete choice models of demand," Transportation, Springer, vol. 49(5), pages 1441-1463, October.
    4. Anna D'Annunzio & Mohammed Mardan & Antonio Russo, 2020. "Multi‐part tariffs and differentiated commodity taxation," RAND Journal of Economics, RAND Corporation, vol. 51(3), pages 786-804, September.
    5. De Borger, Bruno, 2001. "Discrete choice models and optimal two-part tariffs in the presence of externalities: optimal taxation of cars," Regional Science and Urban Economics, Elsevier, vol. 31(4), pages 471-504, July.
    6. Hörcher, Daniel & Graham, Daniel J., 2020. "MaaS economics: Should we fight car ownership with subscriptions to alternative modes?," Economics of Transportation, Elsevier, vol. 22(C).
    7. Szmerekovsky, Joseph G. & Zhang, Jiang, 2009. "Pricing and two-tier advertising with one manufacturer and one retailer," European Journal of Operational Research, Elsevier, vol. 192(3), pages 904-917, February.
    8. Anders Karlström & Mårten Palme & Ingemar Svensson, 2011. "Assessing the welfare change from a pension reform," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 18(6), pages 634-657, December.
    9. Steele Santos, Paulo E. & Coradi Leme, Rafael & Galvão, Leandro, 2012. "On the electrical two-part tariff—The Brazilian perspective," Energy Policy, Elsevier, vol. 40(C), pages 123-130.
    10. A. de Palma & K. Kilani, 2003. "Compensating Variation for Discrete Choice Models," Thema Working Papers 2003-02, THEMA (Théorie Economique, Modélisation et Applications), CY Cergy-Paris University, ESSEC and CNRS.
    11. Zongsheng Huang & Jiajia Nie & Sang-Bing Tsai, 2017. "Dynamic Collection Strategy and Coordination of a Remanufacturing Closed-Loop Supply Chain under Uncertainty," Sustainability, MDPI, vol. 9(5), pages 1-18, April.

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    Keywords

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    JEL classification:

    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies

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