The strength of the waterbed effect depends on tariff type

Research output: Contribution to journalArticle

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 languageEnglish
Pages (from-to)291-294
Number of pages4
JournalEconomics Letters
Volume125
Issue number2
DOIs
Publication statusPublished - 1 Nov 2014

Keywords

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

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