Working Paper: CEPR ID: DP5437
Authors: Steffen Hoernig; Tommaso Valletti
Abstract: We consider a media market where consumers mix content offered by different firms and firms charge two-part tariffs. As compared to pure linear pricing (pay-per-view), firms make higher profits, while consumers are worse off and the allocation is not first-best. We also consider flat subscription fees and show that they make mixing unattractive. Both two-part tariffs and pay-per-view Pareto-dominate flat fees.
Keywords: combinable products; flat fees; pay-per-view; two-part tariffs
JEL Codes: L13; L82
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| two-part tariffs (L90) | higher profits (D33) |
| linear pricing (D41) | lower profits (D33) |
| two-part tariffs (L90) | increased revenues from mixing customers (H27) |
| flat fees (D49) | inefficiencies (D61) |
| two-part tariffs (L90) | Pareto improvement in welfare (D69) |
| flat fees (D49) | lower overall welfare (D69) |
| two-part tariffs (L90) | consumers worse off (D11) |