Monopolistic Competition with Two-Part Tariffs

Posted: 27 Apr 2008

See all articles by Nicholas Economides

Nicholas Economides

New York University - Leonard N. Stern School of Business - Department of Economics

Steven S. Wildman

Quello Center; Michigan State University; University of Colorado at Boulder

Date Written: August 1995

Abstract

Non-uniform pricing equilibria are shown to dominate uniform pricing equilibria in free entry, monopolistically competitive markets with identical consumers. The non- uniform pricing equilibrium is welfare optimal. Comparisons of Cournot and non-uniform pricing equilibria in terms of the equilibrium number of firms and sales per firm show that the positioning of Cournot equilibria relative to the welfare optimal configuration of firms and outputs depends on the relative curvatures of inverse demand and average cost functions, entry-induced rotation of inverse demand functions, and the relative price effects of changes in own and other firms' outputs. The choice between the non- uniform and uniform pricing interpretations of equilibria in differentiated product markets may have important implications for policy analysis.

Keywords: Monopolistic competition, efficiency

JEL Classification: L1, D4

Suggested Citation

Economides, Nicholas and Wildman, Steven S., Monopolistic Competition with Two-Part Tariffs (August 1995). NYU Working Paper No. EC-95-10, Available at SSRN: https://ssrn.com/abstract=6791

Nicholas Economides (Contact Author)

New York University - Leonard N. Stern School of Business - Department of Economics ( email )

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Steven S. Wildman

Quello Center ( email )

409 Communication Arts & Sciences Building
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Michigan State University ( email )

Agriculture Hall
East Lansing, MI 48824-1122
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University of Colorado at Boulder ( email )

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Boulder, CO 80309
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