Nonlinear Pricing and Exclusion: II. Must-Stock Products

Philippe Choné and Laurent Linnemer

No 2014-17, Working Papers from Center for Research in Economics and Statistics

Abstract: We adapt the exclusion model of Choné and Linnemer (2014) to reflect the notion that dominant firms are unavoidable trading partners. In particular, we introduce the share of the buyer’s demand that can be addressed by the rival as a new dimension of uncertainty. Nonlinear price-quantity schedules allow the dominant firm to adjust the competitive pressure placed on the rival to the size of the contestable demand, and to distort the rival supply at both the extensive and intensive margins. When disposal costs are sufficiently large, this adjustment may yield highly nonlinear and locally decreasing schedules, such as "retroactive rebates".

Keywords: Inefficient exclusion; buyer opportunism; disposal costs; quantity rebates; incomplete information. (search for similar items in EconPapers)
JEL-codes: D82 D86 L12 L42 (search for similar items in EconPapers)
Pages: 33
Date: 2014-06
New Economics Papers: this item is included in nep-com, nep-mic, nep-mkt and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Nonlinear pricing and exclusion:II. Must-stock products (2016)
Working Paper: Nonlinear pricing and exclusion:II. Must-stock products (2016)
Working Paper: Nonlinear Pricing and Exclusion: II. Must-Stock Products (2014)
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