Center for Advanced Management
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Sprachumschaltung

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Prof. Eugenio Miravete, Ph.D. (University of Texas at Austin)

Programm

  • Datum: 14.05.2008
    Zeit:
    13:15 - 14:45
    Raum:
    Raum 307, Schackstr. 4, II

The Limited Gains from Complex Tariffs

This paper uses an equilibrium model of multipart nonlinear pricing to determine the magnitude of foregone profits due to the implementation of simple tariff options. I then use the available information from a cross-section of independent cellular telephone markets to study how these foregone profits vary with markets' observable characteristics. Results show that commercialization costs effectively limit the number of tariff options offered to consumers. The evidence presented in this paper suggests that firms should only offer a few tariff options if their commercialization and product development costs are non-negligible. More importantly, this evidence favors the use of two-part tariffs and other simple pricing strategies in theoretical modeling in order to overcome the analytical difficulties of the existing general models of nonlinear pricing and thus responds to the many open questions in the area of nonlinear pricing.

Paper (pdf, 360 kB)

 

  • Datum: 15.05.2008
    Zeit:
    18:00 - 19:30
    Raum:
    Raum 307, Schackstr. 4, II

The Doubtful Profitability of Foggy Pricing

A particular tariff option is said to be foggy when another option or a combination of other tariff options offered by the same firm is always less expensive regardless of the usage profile of any customer. Alternatively, tariff fogginess may refer to the whole set of tariff options and it is related to the low likelihood that a particular tariff option ends up being the least expensive one among those of a menu of tariff plans for an arbitrary distribution of usage patterns. This paper takes advantage of the exogenous entry of a second carrier in the early U.S. cellular telephone industry. It shows that competition induces firms to introduce mostly non-foggy options, thus abandoning deceptive pricing strategies (fog lifting) aimed to profit from mistaken choices of consumers rather than softening competition through the use of foggy tactics (co-opetition). Results indicate that tariff fogginess is less severe with the entry of a second firm in the industry according to either definition of foggy pricing. Thus competition alone, and in particular the tactics of entrants, appears to correct deceptive pricing strategies, although such correction does not necessarily occur immediately after the entry of a competitor but rather in the long run. Results are robust to the existence of individual uncertainty regarding future telephone usage when consumers sign up for a particular tariff plan.

 


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