Munich Personal RePEc Archive

Intrapersonal price discrimination in a dominant firm model

Antelo, Manel and Bru, Lluís (2021): Intrapersonal price discrimination in a dominant firm model.

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Abstract

The standard dominant firm (DF)-competitive fringe model, in which all firms sell the good through linear pricing, is extended to the use of nonlinear contracts in the form of two-part tariffs (2PT). We show that under general conditions, the DF practices intrapersonal price discrimination, and supplies to fewer consumers than under linear pricing. As a consequence, nonlinear pricing leads to an inefficient result and consumers are worse off than when the DF uses linear prices; on the contrary, fringe firms are better off as they end up charging a higher price for the good.

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