Delivered versus mill nonlinear pricing in free entry markets

Silvia Ferreira Jorge and Cesaltina Pires

Nova SBE Working Paper Series from Universidade Nova de Lisboa, Nova School of Business and Economics

Abstract: This paper discusses a model where consumers simultaneously differ according to one unobservable (preference for quality) and one observable characteristic (location). In these circumstances nonlinear prices arise in equilibrium. The main question addressed in this work is whether firms should be allowed to practise different nonlinear prices at each location (delivered nonlinear pricing) or should be forced to set an 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 either smaller, equal, or higher under delivered nonlinear pricing. In addition, we show that delivered nonlinear pricing yields in the long-run higher welfare and, consequently, our results support the view that discriminatory nonlinear pricing should not be prohibited.

Keywords: Delivered nonlinear pricing; mill nonlinear pricing; asymmetric information; pricing regulation (search for similar items in EconPapers)
JEL-codes: D43 D82 L13 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2004
New Economics Papers: this item is included in nep-com, nep-fin, nep-mic and nep-mkt
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Delivered versus Mill Nonlinear Pricing in Free Entry Markets (2004)
Working Paper: Delivered versus Mill Nonlinear Pricing in Free Entry Markets (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:unl:unlfep:wp459

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