Nonlinear prices, homogeneous goods, search

Atabek Atayev

No 21-092, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

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.

Keywords: Nonlinear prices; consumer search; homogeneous goods (search for similar items in EconPapers)
JEL-codes: D11 D43 D83 L13 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-com, nep-cta, nep-mic and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:21092

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