The Welfare Performance of Sequential Pricing Mechanisms

40 Pages Posted: 8 Nov 2005

See all articles by Eugenio J. Miravete

Eugenio J. Miravete

University of Texas at Austin; Centre for Economic Policy Research (CEPR)

Abstract

Consumers are commonly required to subscribe to particular tariff options before uncertainty regarding their future purchases gets resolved. Since the general comparison of welfare performance of different pricing mechanisms is ambiguous, this article empirically evaluates the expected welfare associated with standard nonlinear pricing and optional tariffs by using information directly linked to the type of individual consumers. Results show that tariffs composed of nonlinear options do not necessarily outperform simpler pricing strategies in terms of expected profits. Furthermore, evidence suggests that a menu of optional two-part tariffs dominates any other pricing strategy from an expected welfare perspective.

Suggested Citation

Miravete, Eugenio J., The Welfare Performance of Sequential Pricing Mechanisms. International Economic Review, Vol. 46, No. 4, pp. 1321-1360, November 2005, Available at SSRN: https://ssrn.com/abstract=825181

Eugenio J. Miravete (Contact Author)

University of Texas at Austin ( email )

Department of Economics
1 University Station C3100
Austin, TX 78712-0301
United States
512-232-1718 (Phone)
512-471-3510 (Fax)

HOME PAGE: http://www.eco.utexas.edu/facstaff/Miravete

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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