Two-Part Tariffs Boost Profits, Reshape Competitive Landscape
The article explores how two-part pricing can affect competition between two companies. The researchers found that when consumers have different preferences, two-part tariffs can lead to lower prices, higher profits, and better social welfare compared to standard pricing. In a specific model, prices match the cost of production, but entry fees may be higher than ideal. Overall, two-part tariffs can benefit companies but may reduce consumer satisfaction in some cases.