2007): "Nonlinear Pricing in Yellow Pages

Nonlinear pricing is a standard practice used by firms in telecommunications, electricity and advertising among others to discriminate among consumers. In this paper, we analyze nonlinear pricing in yellow pages using a structural approach. First, we develop a model that incorporates some features of the industry such as the requirement by law to propose a minimal advertisement size at zero price to all firms. Our model also includes a general cost function. The structure of the model is defined by the distribution of unknown firms ’ types, the inverse demand function and the firm’s cost function. Under the assumption of a multiplicative inverse de-mand function into a socalled base marginal utility function and the firm’s type, we show that the structure is nonparametrically identified while using the first-order conditions of the publisher’s optimization problem. The cost function is identified through the marginal cost at the total amount produced only. We then propose a simple nonparametric procedure to estimate the type distribution and the base marginal utility function. We establish the asymptotic properties of our two-ste