Complex pricing and consumer-side attention

Christian Fischer-Thöne, Alexander Rasch and Tobias Wenzel

International Journal of Industrial Organization, 2025, vol. 99, issue C

Abstract: This paper analyzes a market in which two horizontally differentiated firms compete by setting menus of two-part tariffs, and some consumers are not informed about the linear per-unit price component. We consider two regulatory interventions that limit firms' ability to price discriminate: (i) diminishing the range of contracts by reducing the number of two-part tariffs offered (which prohibits inter-group price discrimination); and (ii) reducing tariff complexity by abolishing linear fees (which prohibits inter-group and intra-group price discrimination). We characterize the effects of these interventions on firm profits and consumer welfare, and we identify conditions for the optimal regulatory policy. Our results provide insights for the evaluation of policy interventions.

Keywords: Two-part tariffs; Consumer attention; Regulation (search for similar items in EconPapers)
JEL-codes: D43 L13 L42 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:99:y:2025:i:c:s0167718725000098

DOI: 10.1016/j.ijindorg.2025.103142

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