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Uncertain Consumer Tastes and Two-Part Tariff

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  • Hao Wang

    (China Center for Economic Research)

Abstract

A service provider sells to homogenous risk-averse consumers through a two-part tariff. The consumers have uncertain tastes toward the service. They subscribe the service before the uncertainty resolves. In contrast with the common view that a monpolist's optimal two-part tariff for homogeneous consumers should entail a usuage rate equalising to the firm's marginal production cost, I show that when consumers have uncertain tastes, the service provider's optimal two-part tariff entails a usuage rate that is greater than the marginal cost.

Suggested Citation

  • Hao Wang, 2007. "Uncertain Consumer Tastes and Two-Part Tariff," Microeconomics Working Papers 22714, East Asian Bureau of Economic Research.
    • Handle: RePEc:eab:microe:22714
    as

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    File URL: http://www.eaber.org/node/22714
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    References listed on IDEAS

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