Nonlinear Prices, Homogeneous Goods, Search

ZEW Discussion Paper
ZEW Discussion Paper

Nonlinear Prices, Homogeneous Goods, Search

We analyze competition on nonlinear prices in homogeneous goods markets with consumer search. In equilibrium firms offer two-part tariffs consisting of a linear price and lump-sum fee. The equilibrium production is socially efficient as the linear price of equilibrium two-part tariffs equals to the production marginal cost. Firms thus compete in lump-sum fees, which are dispersed in equilibrium. We show that sellers enjoy higher profit, whereas consumers are worse-off with two-part tariffs than with linear prices. The competition softens because with two-part tariffs firms can make effective per-consumer demand less elastic than the actual demand.

Atayev, Atabek (2021), Nonlinear Prices, Homogeneous Goods, Search , ZEW Discussion Paper No. 21-092, Mannheim.

Authors Atabek Atayev