Complex pricing and consumer-side attention


Fischer, Christian ; Rasch, Alexander ; Wenzel, Tobias


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URL: https://madoc.bib.uni-mannheim.de/58322
URN: urn:nbn:de:bsz:180-madoc-583227
Document Type: Working paper
Year of publication: 2020
The title of a journal, publication series: ZEW Discussion Papers
Volume: 20-075
Place of publication: Mannheim
Publication language: English
Institution: Sonstige Einrichtungen > ZEW - Leibniz-Zentrum für Europäische Wirtschaftsforschung
MADOC publication series: Veröffentlichungen des ZEW (Leibniz-Zentrum für Europäische Wirtschaftsforschung) > ZEW Discussion Papers
Subject: 330 Economics
Classification: JEL: D43 , L13 , L42,
Keywords (English): Two-part tariffs , consumer attention , policy intervention
Abstract: This paper analyzes a market in which two horizontally differentiated firms compete by setting menus of two-part tariffs, and in which some consumers are not informed about the linear per-unit price component. We consider two regulatory interventions that limit firms’ ability to price discriminate: (i) diminishing the range of contracts via a reduction in the number of two-part tariffs offered (which prohibits inter-group price discrimination), and (ii) a reduction in tariff complexity via the abolishment of linear fees (which prohibits inter- and intra-group price discrimination). We characterize the effects of these interventions on firm profits and (informed and uninformed) consumer welfare, and identify conditions for the optimal policy. Our results provide insights for the evaluation of recent policy interventions (e.g., the regulation of roaming charges in the EU market).

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