Two-Part Tariff Competition in the Hotelling's Location Model

초록

We examine a model where duopoly competes with a two-part tariff in the Hotelling's location model. Consumer preference is allowed to depend on location while the traveling costs may differ. The main results are as follows. When consumer preference depends on location but the traveling costs are the same, the equilibrium price is higher than the marginal cost. Compared with the uniform pricing, however, the equilibrium price is lower in the two-part tariff, so the two-part tariff is efficiency enhancing. When consumer preference is identical but the traveling costs differ, the equilibrium price is equal to the marginal cost. The firm with lower traveling cost can charge a higher fixed rate and has a higher market share.

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