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Mixing Goods with Two-Part Tariffs

Author

Listed:
  • Steffen Hoernig

    (New University of Lisbon - Faculdade de Economia)

  • Tommaso Valletti

    (Imperial College London, University of Rome "Tor Vergata" and CEPR)

Abstract

We consider a market where consumers mix content offered by different firms. We show how tariff structures have an impact on firms' profits and efficiency. As compared to pure linear pricing, when firms charge two-part tariffs they make higher profits, while consumers are worse off and the allocation is not first-best since too little mixing occurs. Flat subscription fees make mixing unattractive and are Pareto-dominated by all the other types of tariffs.

Suggested Citation

  • Steffen Hoernig & Tommaso Valletti, 2006. "Mixing Goods with Two-Part Tariffs," CEIS Research Paper 72, Tor Vergata University, CEIS.
    • Handle: RePEc:rtv:ceisrp:72
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    References listed on IDEAS

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    5. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 949-965, July.
    6. Victor Ginsburgh & David Throsby, 2006. "Handbook of the economics of art and culture," ULB Institutional Repository 2013/1673, ULB -- Universite Libre de Bruxelles.
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    9. Jean J. Gabszewicz & Didier Laussel & Nathalie Sonnac, 2004. "Programming and Advertising Competition in the Broadcasting Industry," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(4), pages 657-669, December.
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    Citations

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    Cited by:

    1. Nagler Matthew G., 2007. "Understanding the Internet's Relevance to Media Ownership Policy: A Model of Too Many Choices," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-28, June.
    2. Gambato, Jacopo & Sandrini, Luca, 2024. "Not as good as it used to be: Do streaming platforms penalize quality?," ZEW Discussion Papers 24-045, ZEW - Leibniz Centre for European Economic Research.
    3. Simon P. Anderson & Bruno Jullien, 2015. "The advertising-financed business model in two-sided media markets," Post-Print hal-02866192, HAL.
    4. Changying Li & Youping Li & Jianhu Zhang, 2023. "On the regulation of public broadcasting," Journal of Economics, Springer, vol. 138(2), pages 129-146, March.
    5. Thöne, Miriam & Rasch, Alexander & Wenzel, Tobias, 2016. "Business models in commercial media markets: Bargaining, advertising, and mixing," VfS Annual Conference 2016 (Augsburg): Demographic Change 145785, Verein für Socialpolitik / German Economic Association.
    6. Gambato, Jacopo & Sandrini, Luca, 2023. "Not as good as it used to be: Do streaming platforms penalize quality?," ZEW Discussion Papers 23-032, ZEW - Leibniz Centre for European Economic Research.
    7. Döpper, Hendrik & Rasch, Alexander, 2022. "Combinable products, price discrimination, and collusion," DICE Discussion Papers 377, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    8. Döpper, Hendrik & Rasch, Alexander, 2024. "Combinable products, price discrimination, and collusion," International Journal of Industrial Organization, Elsevier, vol. 94(C).
    9. Griva, Krina & Vettas, Nikolaos, 2015. "On two-part tariff competition in a homogeneous product duopoly," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 30-41.
    10. Peitz, Martin & Valletti, Tommaso M., 2008. "Content and advertising in the media: Pay-tv versus free-to-air," International Journal of Industrial Organization, Elsevier, vol. 26(4), pages 949-965, July.
    11. Peitz, Martin & Reisinger, Markus, 2014. "The Economics of Internet Media," Working Papers 14-23, University of Mannheim, Department of Economics.

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    More about this item

    Keywords

    Two-part tariffs; flat fees; combinable products; pay-per-view;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L82 - Industrial Organization - - Industry Studies: Services - - - Entertainment; Media

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