Mixing Goods with Two-Part Tariffs

24 Pages Posted: 3 Oct 2006

See all articles by Steffen Hoernig

Steffen Hoernig

Nova School of Business and Economics

Tommaso M. Valletti

Imperial College Business School; Centre for Economic Policy Research (CEPR)

Date Written: August 2006

Abstract

We consider a market where consumers mix content offered by different firms. We show how tariff structures have an impact on firms' profits and efficiency. As compared to pure linear pricing, when firms charge two-part tariffs they make higher profits, while consumers are worse off and the allocation is not first-best since too little mixing occurs. Flat subscription fees make mixing unattractive and are Pareto-dominated by all the other types of tariffs.

Keywords: Two-part tariffs, flat fees, combinable products, pay-per-view

JEL Classification: L13, L82

Suggested Citation

Hoernig, Steffen and Valletti, Tommaso M., Mixing Goods with Two-Part Tariffs (August 2006). Available at SSRN: https://ssrn.com/abstract=934533 or http://dx.doi.org/10.2139/ssrn.934533

Steffen Hoernig

Nova School of Business and Economics ( email )

Universidade Nova de Lisboa
Campus de Campolide
Lisboa, 1099-032
Portugal
+351-213801600 (Phone)

HOME PAGE: http://docentes.fe.unl.pt/~shoernig/

Tommaso M. Valletti (Contact Author)

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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