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Title:Can price discrimination lead to product differentiation? A vertical differentiation model PDF Logo
Authors:Herweg, Fabian
Issue Date:2007
Series/Report no.:Bonn econ discussion papers 2007,2
Abstract:In this paper, I compare two-part tariff competition to linear pricing in a vertically differentiated duopoly. Consumers have identical tastes for quality but differ in their preferences for quantity. The main finding is that quality differentiation occurs in equilibrium if and only if two-part tariffs are permitted. Furthermore, two-part tariff competition encourages entry, which in turn increases welfare. Nevertheless, two-part tariff competition decreases consumers? surplus compared to linear pricing.
Subjects:Duopoly
Two-part tariff
Vertical differentiation
JEL:L13
L11
D43
Document Type:Working Paper
Appears in Collections:Bonn Econ Discussion Papers, Bonn Graduate School of Economics (BGSE), Universität Bonn

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