Does Competition Definitely Benefit Consumers? A Case of Two-Part Tariffs

17 Pages Posted: 8 Nov 2006

See all articles by Xiangkang Yin

Xiangkang Yin

Deakin University; Financial Research Network (FIRN)

Date Written: June 2006

Abstract

This note compares monopoly equilibrium outcomes with those of duopoly when firms price their products with two-part tariffs. Although a monopolistic firm never charges a lower marginal price than imperfectly competitive firms, it sets a lower entry fee under certain market conditions. In turn, monopoly is likely to result in greater aggregate consumer surplus, net of all purchasing costs, than duopoly. This implies that in the process of opening a monopolistic market to competition, the regulator must carefully examine the market conditions to ensure that deregulation can reduce deadweight loss and improve consumer surplus as well.

Keywords: Monopoly, Duopoly, Competition, Two-part Tariff, Consumer Surplus

JEL Classification: D42, D43, L12, L13

Suggested Citation

Yin, Xiangkang, Does Competition Definitely Benefit Consumers? A Case of Two-Part Tariffs (June 2006). Available at SSRN: https://ssrn.com/abstract=941860 or http://dx.doi.org/10.2139/ssrn.941860

Xiangkang Yin (Contact Author)

Deakin University ( email )

Melbourne, Victoria
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

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