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Two-part tariff competition in duopoly

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  • Yin, Xiangkang

Abstract

Built on the location model, this paper studies the rivalry of two firms in an industry through two-part tariffs. It is found that kinky profit functions are responsible for the coincidence of imperfectly competitive equilibrium and cartelization outcome. A duopoly likely results in higher entry fees and industry profits and lower net consumers surplus than a monopoly because each duopolist has a smaller market size than the monopolist. But social welfare in the monopoly is lower than in the duopoly. In comparison with uniform pricing, two-part tariffs tend to have lower prices, more profits and welfare but the magnitude of net consumers surplus is ambiguous.
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Suggested Citation

  • Yin, Xiangkang, 2004. "Two-part tariff competition in duopoly," International Journal of Industrial Organization, Elsevier, vol. 22(6), pages 799-820, June.
    • Handle: RePEc:eee:indorg:v:22:y:2004:i:6:p:799-820
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    More about this item

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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