Nonlinear prices, homogeneous goods, search


Atayev, Atabek


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URL: https://madoc.bib.uni-mannheim.de/61208
URN: urn:nbn:de:bsz:180-madoc-612080
Document Type: Working paper
Year of publication: 2021
The title of a journal, publication series: ZEW Discussion Papers
Volume: 21-092
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: 350 Public administration
Classification: JEL: D11 , D43 , D83 , L13,
Keywords (English): nonlinear prices , consumer search , homogeneous goods
Abstract: We analyze competition on nonlinear prices in homogeneous goods markets with consumer search. In equilibrium firms offer two-part tariffs consisting of a linear price and lump-sum fee. The equilibrium production is socially efficient as the linear price of equilibrium two-part tariffs equals to the production marginal cost. Firms thus compete in lump-sum fees, which are dispersed in equilibrium. We show that sellers enjoy higher profit, whereas consumers are worse-off with two-part tariffs than with linear prices. The competition softens because with two-part tariffs firms can make effective per-consumer demand less elastic than the actual demand.

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