Nonlinear Prices, Homogeneous Goods, Search

Atabek Atayev

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arXiv · 2109.15198

Nonlinear Prices, Homogeneous Goods, Search

Atabek Atayev

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Abstract

We analyze competition on nonlinear prices in homogeneous goods markets with consumer search. In equilibrium firms offer two-part tariffs consisting of a linear price and lump-sum fee. The equilibrium production is socially efficient as the linear price of equilibrium two-part tariffs equals to the production marginal cost. Firms thus compete in lump-sum fees, which are dispersed in equilibrium. We show that sellers enjoy higher profit, whereas consumers are worse-off with two-part tariffs than with linear prices. The competition softens because with two-part tariffs firms can make effective per-consumer demand less elastic than the actual demand.

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Atabek Atayev. 2021-09-30. Nonlinear Prices, Homogeneous Goods, Search. https://arxiv.org/abs/2109.15198

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