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When two-part tariffs are not enough: Mixing with nonlinear pricing

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  • Valletti, Tommaso
  • Hoernig, Steffen

Abstract

We consider competition in nonlinear tariffs when consumers mix two goods, and ask whether simple two-part tariffs or exclusivity can arise in equilibrium. Contrary to the existing literature, this happens only when consumer types are observable. If they are unobservable, then the equilibrium tariff has decreasing marginal prices even when goods are almost homogeneous, and a third of consumers always mixes goods. Two-part tariffs will never even arise as best responses to arbitrary tariffs.

Suggested Citation

  • Valletti, Tommaso & Hoernig, Steffen, 2010. "When two-part tariffs are not enough: Mixing with nonlinear pricing," CEPR Discussion Papers 7720, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:7720
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    References listed on IDEAS

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    Cited by:

    1. David Martimort & Aggey Semenov & Lars Stole, 2016. "A Complete Characterization of Equilibria in Common Agency Screening Games," Working Papers 1618E, University of Ottawa, Department of Economics.
    2. Gambato, Jacopo & Sandrini, Luca, 2024. "Not as good as it used to be: Do streaming platforms penalize quality?," ZEW Discussion Papers 24-045, ZEW - Leibniz Centre for European Economic Research.
    3. Martimort, David & Semenov, Aggey & Stole, Lars A., 2018. "A complete characterization of equilibria in an intrinsic common agency screening game," Theoretical Economics, Econometric Society, vol. 13(3), September.
    4. Döpper, Hendrik & Rasch, Alexander, 2022. "Combinable products, price discrimination, and collusion," DICE Discussion Papers 377, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    5. Martimort, David & Stole, Lars, 2015. "Menu Auctions and Influence Games with Private Information," MPRA Paper 62388, University Library of Munich, Germany.
    6. Döpper, Hendrik & Rasch, Alexander, 2024. "Combinable products, price discrimination, and collusion," International Journal of Industrial Organization, Elsevier, vol. 94(C).
    7. Martimort, David & Stole, Lars, 2011. "Public Contracting in Delegated Agency Games," MPRA Paper 32874, University Library of Munich, Germany.
    8. Gambato, Jacopo & Sandrini, Luca, 2023. "Not as good as it used to be: Do streaming platforms penalize quality?," ZEW Discussion Papers 23-032, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    Exclusivity; Mixing goods; Nonlinear tariffs; Two-part tariffs;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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