Delivered versus mill nonlinear pricing with endogenous market structure

Sílvia Jorge and Cesaltina Pires

International Journal of Industrial Organization, 2008, vol. 26, issue 3, 829-845

Abstract: This paper discusses a model where consumers differ according to one unobservable (preference for quality) and one observable characteristic (location), with nonlinear prices arising in equilibrium. The main question addressed is whether firms should be allowed to practice different nonlinear prices at each location (delivered nonlinear pricing) or should be forced to set a unique nonlinear contract (mill nonlinear pricing). Assuming that firms can costless relocate, we show that the free entry long-run number of firms may be smaller, equal, or higher under delivered nonlinear pricing. Moreover, delivered nonlinear pricing yields higher long-run welfare when (i) fixed costs are low and when (ii) fixed costs are intermediate and consumer types are not very similar.

Date: 2008
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167-7187(07)00082-3
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:26:y:2008:i:3:p:829-845

Access Statistics for this article

International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal

More articles in International Journal of Industrial Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().