DP5437 Mixing Media with Two-Part Tariffs

Author(s): Steffen Hoernig, Tommaso Valletti
Publication Date: January 2006
Keyword(s): combinable products, flat fees, pay-per-view, two-part tariffs
JEL(s): L13, L82
Programme Areas: Industrial Organization
Link to this Page: www.cepr.org/active/publications/discussion_papers/dp.php?dpno=5437

We consider a media market where consumers mix content offered by different firms and firms charge two-part tariffs. As compared to pure linear pricing (pay-per-view), firms make higher profits, while consumers are worse off and the allocation is not first-best. We also consider flat subscription fees and show that they make mixing unattractive. Both two-part tariffs and pay-per-view Pareto-dominate flat fees.