Working Paper: CEPR ID: DP7720
Authors: Steffen Hoernig; Tommaso Valletti
Abstract: We consider competition in nonlinear tariffs when consumers mix two goods, and ask whether simple two-part tariffs or exclusivity can arise in equilibrium. Contrary to the existing literature, this happens only when consumer types are observable. If they are unobservable, then the equilibrium tariff has decreasing marginal prices even when goods are almost homogeneous, and a third of consumers always mixes goods. Two-part tariffs will never even arise as best responses to arbitrary tariffs.
Keywords: exclusivity; mixing goods; nonlinear tariffs; 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 |
|---|---|
| Observable consumer types (D11) | two-part tariffs can emerge (D43) |
| two-part tariffs can emerge (D43) | efficient outcomes (D61) |
| Unobservable consumer types (D11) | two-part tariffs will never emerge (F16) |
| Unobservable consumer types (D11) | equilibrium pricing structures exhibit quantity discounts (L11) |
| Observable consumer types (D11) | exclusivity can arise endogenously (D43) |
| Unobservable consumer types (D11) | full exclusivity cannot arise (D52) |