[Seminaire CREM] Two-part tariff, demand uncertainty and risk sharing: From theory to experimental evidence - Faculté Des Sciences Economiques

In an uncertain demand environment, Rey and Tirole (1986) show that the per unit price of a two-part tariff can have insurance properties, insofar as it transfers risk bearing from highly risk-averse downstream firms to neutral upstream firms. In this paper, we experimentally test this result in a two-part tariff game with demand uncertainty. The role of the subjects in the experiment is then controlled according to their elicited risk aversion level. When the probability of meeting positive demand is high, the experimental results confirm the theoretical prediction: the per unit price has insurance properties such that the latter is higher than in a certain demand environment and the part of the rent extracted by the fixed part is lower. However, this insurance property does not stand in the experimental results when the probability of meeting positive demand is low. The results show that in the latter case there is insurance demand, such as high unit prices are accepted, but that this insurance demand is not fulfilled enough.