The Doubtful Profitability of Foggy Pricing
NET Institute Working Paper No. 04-07
30 Pages Posted: 15 Nov 2004
There are 2 versions of this paper
The Doubtful Profitability of Foggy Pricing
The Doubtful Profitability of Foggy Pricing
Date Written: October 2004
Abstract
This paper studies whether competition may induce firms abandoning deceptive pricing strategies aimed to profit from mistaken choices of consumers. The empirical analysis focuses on the pricing practices of early U.S. cellular firms, both under monopoly and duopoly. Foggy tariff options are those that are dominated by another option or a combination of other tariff options offered by the firm. I also define a measure of fogginess of non-dominated tariffs based on the range of airtime usage for which they are the least expensive option among those available. Results indicate that firms offer more dominated tariff options in a competitive market than under monopoly. While markets are profitable, perhaps because they grow or because firms collude, the use of foggy tactics is not frequent. However, if the market is more mature, or if firms do not cooperate, thus reducing the return to their investment, then they commonly turn to foggy pricing.
Keywords: Nonlinear pricing, foggy strategies, co-opetition
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Competitive Non-Linear Pricing in Duopoly Equilibrium: The Early Us Cellular Telephone Industry
-
Evaluating Wireless Carrier Consolidation Using Semiparametric Demand Estimation
By Patrick Bajari, Jeremy T. Fox, ...
-
Are All Those Calling Plans Really Necessary? The Limited Gains from Complex Tariffs
-
The Effect of Entry and Market Structure on Cellular Pricing Tactics
By Katja Seim and V. Brian Viard
-
The Effect of Entry and Market Structure on Cellular Pricing Tactics
By Katja Seim and V. Brian Viard
-
Identifying Price Discrimination When Product Menus are Endogenous
-
The Effect of Market Structure on Cellular Technology Adoption and Pricing
By Katja Seim and V. Brian Viard