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THE WELFARE PERFORMANCE OF SEQUENTIAL PRICING MECHANISMS
(Click above to download a pdf copy of the paper)
- Abstract: Consumers are commonly required to subscribe to particular
tariff options before uncertainty regarding their future purchases gets
resolved. Since the general comparison of welfare performance of different
pricing mechanisms is ambiguous, this paper empirically evaluates the
expected welfare associated to standard nonlinear pricing and optional
tariffs by using information directly linked to the type of individual
consumers. Results shows that tariffs composed of nonlinear options does not
necessarily outperforms simpler pricing strategies in terms of expected
profits. Furthermore, the evidence suggests that a menu of optional
two-part tariffs dominates any other pricing strategy from an expected
welfare perspective.
- Publication: International Economic Review, 46, 1321-1360, November 2005.
- JEL: D42, D82, L96.
- First version: September 1999.
- Final version: August 2004.
- Funding: None.
- Seminars: Universidad Autónoma de Barcelona;
Universidad Carlos III de Madrid; New York University; University of Pennsylvania; Universidad Pompeu Fabra; Princeton University; Rutgers University at New Brunswick; Stern
School of Business; University of Wisconsin-Madison; and Wissenschaftszentrum Berlin für
Sozialforschung.
- Conferences: Workshop on Empirical
Industrial Organization, Vigo 1999; Workshop on Applied Microeconomics
and Econometrics at Johns Hopkins University, Baltimore 2000; and Winter Meeting of
the Econometric Society, Boston 2000.
- Noteworthy: Previously circulated as CEPR DP No. 2699.
- Data.
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