When prohibiting wholesale price-parity agreements may harm consumers

Michele Bisceglia, Jorge Padilla and Salvatore Piccolo ()

International Journal of Industrial Organization, 2021, vol. 76, issue C

Abstract: We study the competitive and welfare effects of wholesale price-parity agreements. These contracts prevent a monopolist, who sells its product to final consumers both directly and indirectly through alternative distribution channels, to charge different input (wholesale) prices to competing intermediaries (e.g., platforms). In a multi-channel and multi-layered industry, organized as an agency business model, we find that the monopolist and the intermediaries do not necessarily have aligned incentives concerning the introduction of wholesale price-parity. While these agreements always hurt the monopolist, they may benefit the intermediaries when competition between the direct and the indirect distribution channels is sufficiently intense. Moreover, when this is the case, in contrast to retail price-parity agreements that typically reduce consumer welfare, wholesale price-parity may also benefit consumers.

Keywords: Antitrust; Consumer welfare; Wholesale price-parity agreements; Agency business model (search for similar items in EconPapers)
JEL-codes: L42 L50 L81 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:76:y:2021:i:c:s016771872100031x

DOI: 10.1016/j.ijindorg.2021.102738

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