Beiträge zur Jahrestagung des Vereins für Socialpolitik 2018: Digitale Wirtschaft - Session: Industrial Organisation - Theory I C08-V1
We analyze a situation in which two horizontally differentiated firms compete in two-part tariffs (i.e., a linear and fixed price), and some consumers are not informed about the linear per-unit price. We show that there is a non-monotone relationship between the degree of consumer-side transparency and firm profits. Moreover, different from a situation without uninformed consumers, firms may make higher profits under two-part tariffs than under fixed fees only. There is also a non-monotone relationship between transparency and consumer surplus. Our model can explain why firms are against the abolishment of roaming fees and why the European Commission (EC) promotes it.
fixed fee linear price roaming transparency two-part tariff