The strength of the waterbed effect depends on tariff type

Steffen Hoernig

Economics Letters, 2014, vol. 125, issue 2, 291-294

Abstract: We show that the waterbed effect, i.e. the pass-through of a change in one price of a firm to its other prices, is much stronger if the latter include subscription rather than only usage fees. In particular, in mobile network competition with a fixed number of customers, the waterbed effect is full under two-part tariffs, while it is only partial under linear tariffs.

Keywords: Waterbed effect; Two-part tariff; Linear tariff; Mobile termination; Two-sided platforms (search for similar items in EconPapers)
JEL-codes: D43 L13 L51 (search for similar items in EconPapers)
Date: 2014
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Working Paper: The strength of the waterbed effect depends on tariff type (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:125:y:2014:i:2:p:291-294

DOI: 10.1016/j.econlet.2014.09.022

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