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

  • Hoernig, Steffen
  • Valletti, Tommaso

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7720.

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Date of creation: Feb 2010
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Handle: RePEc:cpr:ceprdp:7720
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