Complex pricing and consumer-side attention

Christian Fischer, Alexander Rasch and Tobias Wenzel

No 20-075, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: This paper analyzes a market in which two horizontally differentiated firms compete by setting menus of two-part tariffs, and in which some consumers are not informed about the linear per-unit price component. We consider two regulatory interventions that limit firms' ability to price discriminate: (i) diminishing the range of contracts via a reduction in the number of two-part tariffs offered (which prohibits inter-group price discrimination), and (ii) a reduction in tariff complexity via the abolishment of linear fees (which prohibits inter- and intra-group price discrimination). We characterize the effects of these interventions on firm profits and (informed and uninformed) consumer welfare, and identify conditions for the optimal policy. Our results provide insights for the evaluation of recent policy interventions (e.g., the regulation of roaming charges in the EU market).

Keywords: Two-part tariffs; Consumer attention; Policy intervention (search for similar items in EconPapers)
JEL-codes: D43 L13 L42 (search for similar items in EconPapers)
Date: 2020
New Economics Papers: this item is included in nep-com, nep-cta and nep-reg
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:20075

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