Blessing or curse? User trading and its impact in three‐part tariffs

Abstract Service providers across various industries frequently employ three‐part tariffs, characterized by an access fee, an allowance, and an overage price. Under demand uncertainty, subscribers with low realized demand may sell their unused allowances to those with high realized demand through a trading platform, a practice we refer to as user trading. This paper analyzes the impact of user trading within the framework of three‐part tariffs. We characterize the firm's optimal tariffs both without and with user trading. We show that user trading does not necessarily benefit the firm; its profit impact depends critically on marginal production cost. When marginal production cost is low, the production‐cost saving from trading is insufficient to offset the lower access fee. When marginal production cost is sufficiently high, trading becomes profitable because either the production‐cost saving exceeds the access‐fee loss or the access‐fee gain exceeds the displaced overage revenue. We further show that the firm optimally charges no transaction fee because such a fee weakens the benefits of user trading without increasing the firm's profit.