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Markets with Consumer Switching Costs and Non-Linear Pricing

Tommy Gabrielsen () and Steinar Vagstad ()

No 04/02, Working Papers in Economics from University of Bergen, Department of Economics

Abstract: In a non-cooperative oligopoly model where firms use simple linear prices, Klemperer (1987) has shown that the existence of consumers’ switching costs may generate monopoly like prices, and thereby create substantial loss in welfare. We show that when allowing firms to use two-part tariffs, social optimal prices are always set and the size and distribution of switching costs only affect the distribution of surplus between fims and consumers.

Keywords: switching costs; non-linear pricing; duopoly (search for similar items in EconPapers)
JEL-codes: D44 D82 L10 L51 (search for similar items in EconPapers)
Pages: 7 pages
Date: 2002-03-13
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