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STRATEGIC EFFECTS OF THREE‐PART TARIFFS UNDER OLIGOPOLY
Author(s) -
CHAO YONG
Publication year - 2013
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12025
Subject(s) - tariff , oligopoly , competition (biology) , microeconomics , economics , marginal cost , contrast (vision) , set (abstract data type) , price discrimination , industrial organization , product differentiation , cournot competition , international economics , computer science , ecology , artificial intelligence , programming language , biology
The distinct element of a three‐part tariff (3PT), compared with linear pricing (LP) or a two‐part tariff, is its quantity target within which the marginal price is zero. This quantity target instrument enriches the firm's strategy set in dictating the competition to a specific level, even in the absence of a usual price discrimination motive. With general differentiated linear demands, the competitive effect of a 3PT in contrast to LP depends on the degree of substitutability between products: Competition is intensified when two products are more differentiated, yet softened when two products are more substitutable.