Resource title

Can price discrimination lead to product differentiation? A vertical differentiation model

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Resource description

In this paper, I compare two-part tariff competition to linear pricing in a vertically differentiated duopoly. Consumers have identical tastes for quality but differ in their preferences for quantity. The main finding is that quality differentiation occurs in equilibrium if and only if two-part tariffs are permitted. Furthermore, two-part tariff competition encourages entry, which in turn increases welfare. Nevertheless, two-part tariff competition decreases consumers? surplus compared to linear pricing.

Resource author

Fabian Herweg

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/22977

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Adapt according to the presented license agreement and reference the original author.