The strength of the waterbed effect depends on tariff type

Steffen Hoernig

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

Abstract: 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.

Keywords: Waterbed effect; two-part tariff; linear tariff; mobile termination; two-sided platforms (search for similar items in EconPapers)
JEL-codes: D43 L13 L51 (search for similar items in EconPapers)
Pages: 10 pages
Date: 2014
New Economics Papers: this item is included in nep-com
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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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