The strength of the waterbed effect depends on tariff type

Steffen Hoernig

doi:10.1016/j.econlet.2014.09.022

The strength of the waterbed effect depends on tariff type

Steffen Hoernig

NOVA School of Business and Economics (NOVA SBE)

Research output: Contribution to journal › Article › peer-review

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.

Original language	English
Pages (from-to)	291-294
Number of pages	4
Journal	Economics Letters
Volume	125
Issue number	2
DOIs	https://doi.org/10.1016/j.econlet.2014.09.022
Publication status	Published - 1 Nov 2014

Keywords

Linear tariff
Mobile termination
Two-part tariff
Two-sided platforms
Waterbed effect

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10.1016/j.econlet.2014.09.022

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The strength of the waterbed effect depends on tariff type

Abstract

Keywords

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