Mixing Media with Two-Part Tari ff s ∗ Steffen H. Hoernig †‡ Tommaso M. Valletti §‡ December 6th 2005 Abstract We consider a media market where consumers mix content of- fered by different firms and firms charge two-part tariffs. As com- pared 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. Keywords: Two-part tariffs, pay-per-view, flat fees, combinable products JEL: L13, L82 ∗ We would like to thank Martin Peitz for helpful comments. Steffen Hoernig received financial support from the research grant POCTI/ECO/44146/2002 of FCT and FEDER, and from NOVAFORUM. † Corresponding author. School of Economics, Universidade Nova de Lisboa, Campus de Campolide, 1099-032 Lisboa, Portugal. Tel: +351 213801645, Fax: +351 213870933, shoernig@fe.unl.pt. ‡ CEPR, 90 - 98 Goswell Road, London EC1V 7RR, United Kingdom. § Tanaka Business School, Imperial College London, South Kensington Campus, London SW7 2AZ, United Kingdom. Tel: +44 (0)20 7594 9215, Fax: +44 (0)20 7823 7685, t.valletti@imperial.ac.uk. 1