Input price discrimination with two-part tariffs and quantity competition

Teis Lunde Lømo

Economics Letters, 2023, vol. 225, issue C

Abstract: This paper studies the effects of banning input price discrimination when a supplier offers two-part tariffs to two downstream firms who have different marginal costs and compete in quantities. I show that such a policy gives a lower input price for the less efficient buyer and a higher input price for the more efficient buyer if final goods are close substitutes and higher input prices for both buyers if final goods are more differentiated. In either case, a ban on price discrimination reduces total output, consumer surplus, and total welfare.

Keywords: Price discrimination; Input markets; Vertical relations; Two-part tariffs; Quantity competition (search for similar items in EconPapers)
JEL-codes: L14 L42 L51 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:225:y:2023:i:c:s0165176523000952

DOI: 10.1016/j.econlet.2023.111070

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