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Competitive Nonlinear Pricing and Bundling (2010)
| Content Provider | CiteSeerX |
|---|---|
| Author | Armstrong, Mark Vickers, John |
| Abstract | We examine competitive nonlinear pricing in a model in which consumers have heterogeneous and elastic demands and can buy from more than one supplier. It is an equilibrium for firms to offer a menu of efficient two-part tariffs. Compared with linear pricing, nonlinear pricing tends to raise profit but harm consumers when: (i) demand is elastic, (ii) there is substantial heterogeneity in consumer demand, (iii) consumers face substantial shopping costs when buying from more than one firm, and (iv) a consumer’s brand preference for one product is correlated with her brand preference for another product. Nonlinear pricing is more likely to lead to welfare gains when (iii) and (iv) hold, but (ii) does not. 1 |
| File Format | |
| Journal | Review of Economics Studies |
| Language | English |
| Publisher Date | 2010-01-01 |
| Access Restriction | Open |
| Subject Keyword | Competitive Nonlinear Pricing Elastic Demand Nonlinear Pricing Tends Consumer Brand Preference Substantial Heterogeneity Consumer Demand Brand Preference Harm Consumer Linear Pricing Nonlinear Pricing Substantial Shopping Cost Efficient Two-part Tariff |
| Content Type | Text |
| Resource Type | Article |
