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Two-part tariff competition in duopoly

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  • Xiangkang Yin

    () (School of Economics, La Trobe University)

Abstract

Built on the location model, this paper studies the rivalry of two firms in an industry through two-part tariffs. It is found that kinky profit functions are responsible for the coincidence of imperfectly competitive equilibrium and cartelization outcome. A duopoly likely results in higher entry fees and industry profits and lower net consumers surplus than a monopoly because each duopolist has a smaller market size than the monopolist. But social welfare in the monopoly is lower than in the duopoly. In comparison with uniform pricing, two-part tariffs tend to have lower prices, more profits and welfare but the magnitude of net consumers surplus is ambiguous.

Suggested Citation

  • Xiangkang Yin, 2000. "Two-part tariff competition in duopoly," Working Papers 2000.11, School of Economics, La Trobe University.
  • Handle: RePEc:trb:wpaper:2000.11
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    References listed on IDEAS

    as
    1. Yin, Xiangkang, 2004. "Two-part tariff competition in duopoly," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 799-820, June.
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    Citations

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    Cited by:

    1. Fuliang Chen & Tao Xu, 2013. "A comparative study on Welfare results of nonlinear and linear pricing: based on asymmetric duopoly market," Chapters,in: The Chinese Anti-Monopoly Law, chapter 6, pages 218-232 Edward Elgar Publishing.
    2. Stephen Davies, Catherine Waddams Price, and Chris M. Wilson, 2014. "Nonlinear Pricing and Tariff Differentiation: Evidence from the British Electricity Market," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1).
    3. Mark Armstrong & John Vickers, 2010. "Competitive Non-linear Pricing and Bundling," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 30-60.
    4. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107687899, January.
    5. Yin, Xiangkang, 2004. "Two-part tariff competition in duopoly," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 799-820, June.
    6. Joan Calzada & Tommaso M. Valletti, 2008. "Network Competition and Entry Deterrence," Economic Journal, Royal Economic Society, vol. 118(531), pages 1223-1244, August.
    7. Fabian Herweg, 2012. "Relaxing competition through quality differentiation and price discrimination," Journal of Economics, Springer, vol. 106(1), pages 1-26, May.
    8. Mark Burkey, 2011. "Spatial pricing models with lumpy transportation costs: the case for travel cost subsidization," Letters in Spatial and Resource Sciences, Springer, vol. 4(3), pages 197-206, October.
    9. Griva, Krina & Vettas, Nikolaos, 2015. "On two-part tariff competition in a homogeneous product duopoly," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 30-41.
    10. Mark L. Burkey & Alexandra Kurepa, 2016. "Spatial Nonlinear Pricing with Per-Trip versus Per-Unit Transportation Costs," The Review of Regional Studies, Southern Regional Science Association, vol. 46(3), pages 237-255, Winter.
    11. Rasch, Alexander & Gössl, Florian, 2016. "The scope for collusion under different pricing schemes," Annual Conference 2016 (Augsburg): Demographic Change 145759, Verein für Socialpolitik / German Economic Association.
    12. Xiangkang Yin, 2013. "Two-part tariffs set by a risk-averse monopolist," Journal of Economics, Springer, vol. 109(2), pages 175-192, June.
    13. Hunold, Matthias & Laitenberger, Ulrich & Licht, Georg & Nikogosian, Vigen & Stenzel, André & Ullrich, Hannes & Wolf, Christoph, 2011. "Modernisierung der Konzentrationsberichterstattung: Endbericht," ZEW Expertises, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research, number 110525.
    14. Robert Somogyi, 2013. "Bertrand-Edgeworth competition with substantial product differentiation," IEHAS Discussion Papers 1332, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
    15. Simon Cowan & Xiangkang Yin, 2008. "Competition Can Harm Consumers ," Australian Economic Papers, Wiley Blackwell, vol. 47(3), pages 264-271, September.
    16. Ji Baek & Jan Brueckner, 2015. "Three-Part Tariffs with Heterogeneous Users: Monopoly and Duopoly Cases," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 47(2), pages 155-165, September.
    17. Gilad Sorek, 2015. "Health Insurance and Competition in Health Care Markets," Auburn Economics Working Paper Series auwp2015-03, Department of Economics, Auburn University.

    More about this item

    Keywords

    Monopoly; Oligopoly; Two-Part Tariff; Cartelization; COMPETITION ; ECONOMIC MODELS;

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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