Competitive Two-Part Tariffs as a Response to Differential Rates of Time Preference.

The major focus of the nonlinear pricing literature has been to demonstrate how welfare in a monopoly can be improved through the use of a nonlinear payment schedule. However, nonlinear prices arise in many different markets. This paper explores nonlinear price equilibria in which both multiple firms and price schedules exist. These outcomes are driven by the use of a sustainability criterion for equilibrium and differential rates of discount as the motivating force for the formation of nonlinear prices. Copyright 1991 by The London School of Economics and Political Science.