The Doubtful Profitability of Foggy Pricing

Eugenio Miravete ()

No 04-07, Working Papers from NET Institute

Abstract: This paper studies whether competition may induce firms abandoning deceptive pricing strategies aimed to profit from mistaken choices of consumers. The empirical analysis focuses on the pricing practices of early U.S. cellular firms, both under monopoly and duopoly. Foggy tariff options are those that are dominated by another option or a combination of other tariff options offered by the firm. I also define a measure of fogginess of non-dominated tariffs based on the range of airtime usage for which they are the least expensive option among those available. Results indicate that firms offer more dominated tariff options in a competitive market than under monopoly. While markets are profitable, perhaps because they grow or because firms collude, the use of foggy tactics is not frequent. However, if the market is more mature, or if firms do not cooperate, thus reducing the return to their investment, then they commonly turn to foggy pricing.

Keywords: Nonlinear Pricing; Foggy Strategies; Co-opetition (search for similar items in EconPapers)
JEL-codes: D43 L96 M21 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2004-10
New Economics Papers: this item is included in nep-com, nep-ind and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: The Doubtful Profitability of Foggy Pricing (2007)
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