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Price discrimination and three part tariffs in a duopoly

Jensen, Sissel
Working paper
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URI
http://hdl.handle.net/11250/162958
Date
2000-03
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  • Discussion papers (SAM) [578]
Abstract
The paper studies how second degree price discrimination can be implemented

in a duopoly with differentiated products. Two firms serve consumers

having heterogeneous willingness to pay for the good, willingness

to pay being private knowledge. Consumers choose from a menu of tariffs

and are subsequently billed according to the chosen tariff. Although product

differentiation enables the firms to implement price discrimination, it

is shown that competition has important effects on the tariff structure. A

fully separating equilibrium can only be reached if the firm is allowed to

use three part tariffs, i.e., quantity discounts conditional on a certain minimum

usage level, in addition to two part tariffs, i.e., quantity discounts on the condition that a fixed fee is paid in advance.
Description
Revised October 2001
Publisher
Norwegian School of Economics and Business Administration. Department of Economics
Series
Discussion paper
2000:3

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