Structural Analysis of Nonlinear Pricing

Yao Luo, Isabelle Perrigne and Quang Vuong

Journal of Political Economy, 2018, vol. 126, issue 6, 2523 - 2568

Abstract: This paper proposes a new methodology for analyzing nonlinear pricing data. We establish identification of the model primitives with a known tariff and characterize the model restrictions on observables. We propose a quantile-based nonparametric estimator that achieves consistency at the parametric rate. We introduce unobserved product heterogeneity with an unknown tariff and show how our identification and estimation results extend. A Monte Carlo study analyzes the robustness of our methodology to menus of two-part tariffs. Analysis of cellular service data assesses the performance of various pricing strategies. We discuss extensions to network effects, multiproduct firms, bundling, differentiated products, and oligopolies.

Date: 2018
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Related works:
Working Paper: Structural Analysis of Nonlinear Pricing (2014)
Working Paper: Structural Analysis of Nonlinear Pricing (2014)
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