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Two-part tariff, demand uncertainty and double marginalization: An experiment

Author

Listed:
  • Bonroy, Olivier
  • Garapin, Alexis
  • Pasquier, Nicolas

Abstract

In an uncertain demand environment, the per-unit price of a two-part tariff can have insurance properties, insofar as it transfers risk from risk-averse downstream firms to less risk averse upstream firms, and compensation properties insofar as it compensates downstream firms for lessened attractiveness of trade. Both properties have opposite effects such as the first one can increase double marginalization and the second one can mitigate it. This paper provides experimental evidence of both properties.

Suggested Citation

  • Bonroy, Olivier & Garapin, Alexis & Pasquier, Nicolas, 2025. "Two-part tariff, demand uncertainty and double marginalization: An experiment," Economics Letters, Elsevier, vol. 247(C).
    • Handle: RePEc:eee:ecolet:v:247:y:2025:i:c:s0165176525000084
    DOI: 10.1016/j.econlet.2025.112171
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    More about this item

    Keywords

    Two-part tariff; Vertical relationship; Demand uncertainty; Risk aversion; Double marginalization; Experiment;
    All these keywords.

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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