The Strength of the Waterbed Effect Depends on Tariff Type
Steffen Hoernig ()
FEUNL Working Paper Series from Universidade Nova de Lisboa, Faculdade de Economia
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. JEL codes: D43, L13, L51
Keywords: Waterbed effect; two-part tariff; linear tariff; mobile termination; two-sided platforms (search for similar items in EconPapers)
Pages: 10 pages
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Journal Article: The strength of the waterbed effect depends on tariff type (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:unl:unlfep:wp586
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