Quick Search:

uzh logo
Browse by:
bullet
bullet
bullet
bullet

Zurich Open Repository and Archive 

Permanent URL to this publication: http://dx.doi.org/10.5167/uzh-51516

Herweg, Fabian; Mierendorff, Konrad (2011). Uncertain Demand, Consumer Loss Aversion, and Flat-Rate Tariffs. Working paper series / Department of Economics No. 12, University of Zurich.

[img]
Preview
PDF
525Kb

Abstract

We consider a model of firm pricing and consumer choice, where consumers are loss averse and uncertain about their future demand. Possibly, consumers in our model prefer a flat rate to a measured tariff, even though this choice does not minimize their expected billing amount—a behavior in line with ample empirical evidence. We solve for the profit-maximizing two-part tariff, which is a flat rate if (a) marginal costs are not too high, (b) loss aversion is intense, and (c) there are strong variations in demand. Moreover, we analyze the optimal nonlinear tariff. This tariff has a large flat part when a flat rate is optimal among the class of two-part tariffs.

Item Type:Working Paper
Communities & Collections:03 Faculty of Economics > Department of Economics
Working Paper Series > Department of Economics
DDC:330 Economics
JEL Classification:D11, D43, L11
Language:English
Date:March 2011
Deposited On:25 Nov 2011 11:13
Last Modified:17 Oct 2012 09:12
Series Name:Working paper series / Department of Economics
ISSN:1664-7041
Official URL:http://www.econ.uzh.ch/wp.html

Users (please log in): suggest update or correction for this item

Repository Staff Only: item control page