Nonlinear Prices, Homogeneous Goods, Search
Theoretical Economics
2021-10-01 v1
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.
Cite
@article{arxiv.2109.15198,
title = {Nonlinear Prices, Homogeneous Goods, Search},
author = {Atabek Atayev},
journal= {arXiv preprint arXiv:2109.15198},
year = {2021}
}