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Two-Part Tariff Competition With Switching Costs and Sales Agents

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  • Solange Berstein

Abstract

This paper study the effects of two-part tariff pricing in a competitive environment with differentiated products and switching costs. This is the case of long distance telephone service, where there is a fixed monthly fee and a charge per call. This is also the case for some financial institutions like mutual funds or pension funds. In many of these industries there are also switching costs. In this environment, markets have reacted by hiring sales agents to switch consumers from one firm to another. Without considering sales agents, social welfare is the same under a two-part tariff regime as under single pricing, but the distribution of surplus is different. When sales agents are introduced to the model, they are able to reduce switching costs, and welfare might increase; but they generate over-switching with respect to the social optimum.

Suggested Citation

  • Solange Berstein, 2002. "Two-Part Tariff Competition With Switching Costs and Sales Agents," Working Papers Central Bank of Chile 162, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:162
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    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_162.pdf
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    References listed on IDEAS

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    Cited by:

    1. Harald Beyer & Rodrigo Vergara, 2002. "Productivity and Economic Growth: The Case of Chile," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.),Economic Growth: Sources, Trends, and Cycles, edition 1, volume 6, chapter 10, pages 309-342, Central Bank of Chile.
    2. Rómulo A. Chumacero, 2002. "Is There Enough Evidence Against Absolute Convergence?," Working Papers Central Bank of Chile 176, Central Bank of Chile.
    3. Solange Berstein & Alejandro Micco, 2002. "Turnover and Regulation: The Chilean Pension Fund Industry," Working Papers Central Bank of Chile 180, Central Bank of Chile.
    4. Rubén Castro, 2005. "Efectos de Largo Plazo de la Comisión Fija en el Sistema Chileno de AFP," Working Papers 9, Superintendencia de Pensiones, revised Aug 2005.

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