Strategic Effects of Three‐Part Tariffs Under Oligopoly

39 Pages Posted: 18 Jul 2013

See all articles by Yong Chao

Yong Chao

University of Louisville - College of Business - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 2013

Abstract

The distinct element of a three‐part tariff (3PT), compared with linear pricing (LP) or a two‐part tariff, is its quantity target within which the marginal price is zero. This quantity target instrument enriches the firm's strategy set in dictating the competition to a specific level, even in the absence of a usual price discrimination motive. With general differentiated linear demands, the competitive effect of a 3PT in contrast to LP depends on the degree of substitutability between products: Competition is intensified when two products are more differentiated, yet softened when two products are more substitutable.

Suggested Citation

Chao, Yong, Strategic Effects of Three‐Part Tariffs Under Oligopoly (August 2013). International Economic Review, Vol. 54, Issue 3, pp. 977-1015, 2013. Available at SSRN: https://ssrn.com/abstract=2295268 or http://dx.doi.org/10.1111/iere.12025

Yong Chao (Contact Author)

University of Louisville - College of Business - Department of Economics ( email )

Louisville, KY 40292
United States
(502)852-3573 (Phone)
(502)852-7672 (Fax)

HOME PAGE: http://yongchao.us

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