Competitive Non-Linear Pricing in Duopoly Equilibrium: The Early Us Cellular Telephone Industry

63 Pages Posted: 19 Nov 2003

See all articles by Eugenio J. Miravete

Eugenio J. Miravete

University of Texas at Austin; Centre for Economic Policy Research (CEPR)

Lars-Hendrik Röller

ESMT European School of Management and Technology; Centre for Economic Policy Research (CEPR); WZB Berlin Social Science Center - Competitiveness and Industrial Change

Date Written: September 2003

Abstract

This Paper estimates an equilibrium oligopoly model of horizontal product differentiation where firms compete in non-linear tariffs. The estimation explicitly incorporates the information contained in the shape of the tariffs offered by competing duopolists to recover the structural parameters associated to the distribution of consumers' unobserved heterogeneity. The model identifies the determinants of the non-uniform equilibrium markups charged to consumers who make different usage of cellular telephone services. Estimates are then used to evaluate the welfare effects of competition, a reduction of the delay in awarding the second cellular license, and alternative linear and non-linear pricing strategies. Our policy evaluations reveal that a single two-part tariff achieves 63% of the potential welfare gains and 94% of the profits of a more complex fully non-linear tariff.

Keywords: Estimation of equilibrium oligopoly models, competitive non-linear pricing, common agency

Keywords: Estimation of equilibrium oligopoly models, competitive non-linear pricing, common agency

JEL Classification: D43, D82, L96

Suggested Citation

Miravete, Eugenio J. and Röller, Lars-Hendrik, Competitive Non-Linear Pricing in Duopoly Equilibrium: The Early Us Cellular Telephone Industry (September 2003). Available at SSRN: https://ssrn.com/abstract=470844

Eugenio J. Miravete (Contact Author)

University of Texas at Austin ( email )

Department of Economics
1 University Station C3100
Austin, TX 78712-0301
United States
512-232-1718 (Phone)
512-471-3510 (Fax)

HOME PAGE: http://www.eco.utexas.edu/facstaff/Miravete

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Lars-Hendrik Röller

ESMT European School of Management and Technology ( email )

Schlossplatz 1
Berlin, 10178
Germany

HOME PAGE: http://www.esmt.org/eng/faculty-research/lars-hendrik-roeller/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

WZB Berlin Social Science Center - Competitiveness and Industrial Change ( email )

Reichpietschufer 50
10785 Berlin
Germany
+49 30 2549 1440 (Phone)
+49 30 2549 1442 (Fax)

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