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Structural Analysis of Nonlinear Pricing

Listed author(s):
  • Yao Luo
  • Isabelle Perrigne
  • Quang Vuong
Registered author(s):

    This paper proposes a methodology for analyzing nonlinear pricing data with an illustration on cellular phone. The model incorporates consumer exclusion. Assuming a known tariff, we establish identification of the model primitives using the first-order conditions of both the firm and the consumer up to a cost parameterization. Next, we propose a new one-step quantile-based nonparametric method to estimate the consumers’ inverse demand and their type distribution. We show that our nonparametric estimator is root-N-consistent. We then introduce unobserved product heterogeneity with an unknown tariff. We show how our identification and estimation results extend. Our analysis of cellular phone consumption data assesses the performance of alternative pricing strategies relative to nonlinear pricing.

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    File URL: https://www.economics.utoronto.ca/public/workingPapers/tecipa-518.pdf
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    Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-518.

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    Length: Unknown pages
    Date of creation: 01 Oct 2014
    Handle: RePEc:tor:tecipa:tecipa-518
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    1. Nicholas Economides & Katja Seim & V. Brian Viard, 2008. "Quantifying the benefits of entry into local phone service," RAND Journal of Economics, RAND Corporation, vol. 39(3), pages 699-730.
    2. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, September.
    3. Jean-Charles Rochet & Philippe Chone, 1998. "Ironing, Sweeping, and Multidimensional Screening," Econometrica, Econometric Society, vol. 66(4), pages 783-826, July.
    4. Lott, John R, Jr & Roberts, Russell D, 1991. "A Guide to the Pitfalls of Identifying Price Discrimination," Economic Inquiry, Western Economic Association International, vol. 29(1), pages 14-23, January.
    5. Khan, Shakeeb & Shin, Youngki & Tamer, Elie, 2011. "Heteroscedastic Transformation Models With Covariate Dependent Censoring," Journal of Business & Economic Statistics, American Statistical Association, vol. 29(1), pages 40-48.
    6. Xiao-Hua Zhou & Huazhen Lin & Eric Johnson, 2008. "Non-parametric heteroscedastic transformation regression models for skewed data with an application to health care costs," Journal of the Royal Statistical Society Series B, Royal Statistical Society, vol. 70(5), pages 1029-1047.
    7. Riley,John G., 2012. "Essential Microeconomics," Cambridge Books, Cambridge University Press, number 9780521827478, December.
    8. Marmer, Vadim & Shneyerov, Artyom, 2008. "Quantile-Based Nonparametric Inference for First-Price Auctions," Microeconomics.ca working papers marmer-08-01-17-12-16-12, Vancouver School of Economics, revised 16 May 2013.
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