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Monopolistic Competition with Two-Part Tariffs

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  • Nicholas Economides
  • Steven S. Wildman

Abstract

Non-uniform pricing equilibria are shown to dominate uniform pricing equilibria in free entry, monopolistically competitive markets with identical consumers. The non-uniform pricing equilibrium is welfare optimal. Comparisons of Cournot and non- uniform pricing equilibria in terms of the equilibrium number of firms and sales per firm show that the positioning of Cournot equilibria relative to the welfare optimal configuration of firms and outputs depends on the relative curvatures of inverse demand and average cost functions, entry-induced rotation of inverse demand functions, and the relative price effects of changes in own and other firms outputs. The choice between the non-uniform and uniform pricing interpretations of equilibria in differentiated product markets may have important implications for policy analysis.

Suggested Citation

  • Nicholas Economides & Steven S. Wildman, 1995. "Monopolistic Competition with Two-Part Tariffs," Working Papers 95-10, New York University, Leonard N. Stern School of Business, Department of Economics.
    • Handle: RePEc:ste:nystbu:95-10
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    References listed on IDEAS

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    Cited by:

    1. Harrison, Mark & Kline, J. Jude, 2001. "Quantity competition with access fees," International Journal of Industrial Organization, Elsevier, vol. 19(3-4), pages 345-373, March.
    2. Makdissi Paul & Wodon Quentin, 2005. "The Impact on Farmers of Privatizing Parastatal Agricultural Monopsonies," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 3(2), pages 1-11, September.

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    More about this item

    Keywords

    two part tariffs; monopolistic competition; variety;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • D4 - Microeconomics - - Market Structure, Pricing, and Design

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