Professor Zhiqi Chen’s Paper Accepted for Publication by the Economic Journal

Chancellor’s Professor and Full Professor Zhiqi Chen’s paper titled “Partitioned Pricing and Collusion on Surcharges” has been accepted for publication in the Economic Journal – one of the top general interest journals in the discipline.

Congratulations, Professor Chen, on this publication!

Abstract: Partitioned pricing is a pricing practice that divides the price of a product into a base price and one or more mandatory surcharges. This paper develops a theory of partitioned pricing using a duopoly model where the owner of each firm determines the surcharge but delegates the setting of base price to a manager. In equilibrium, both firms choose partitioned pricing over the conventional all-inclusive pricing. Moreover, partitioned pricing leads to higher full prices and larger profits than all-inclusive pricing. Most surprisingly, collusion on surcharges without any coordination on base prices is as profitable as collusion on all-inclusive prices.