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Thursday, July 24, 2014

The Strength of the Waterbed Effect Depends on Tariff Type

Steffen Hoernig, Nova School of Business and Economics, Universidade Nova de Lisboa discusses The Strength of the Waterbed Effect Depends on Tariff Type .

ABSTRACT: We show that the waterbed effect, i.e. the pass-through of a change in one price of a firm to its other prices, is much stronger if the latter include subscription rather than only usage fees. In particular, in mobile network competition with a fixed number of customers, the waterbed effect is full under two-part tariffs, while it is only partial under linear tariffs.

http://lawprofessors.typepad.com/antitrustprof_blog/2014/07/the-strength-of-the-waterbed-effect-depends-on-tariff-type-.html

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