Two-Part Tariffs versus Linear Pricing Between Manufacturers and Retailers: Empirical Tests on Differentiated Products Markets

Céline Bonnet, Pierre Dubois () and Michel Simioni

No 6016, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We present a methodology allowing to introduce manufacturers and retailers vertical contracting in their pricing strategies on a differentiated product market. We consider in particular two types of non linear pricing relationships, one where resale price maintenance is used with two part tariffs contracts and one where no resale price maintenance is allowed in two part tariffs contracts. Our contribution allows to recover price-cost margins from estimates of demand parameters both under linear pricing models and two part tariffs. The methodology allows then to test between different hypothesis on the contracting and pricing relationships between manufacturers and retailers in the supermarket industry using exogenous variables supposed to shift the marginal costs of production and distribution. We apply empirically this method to study the market for retailing bottled water in France. Our empirical evidence shows that manufacturers and retailers use non linear pricing contracts and in particular two part tariffs contracts with resale price maintenance. At last, thanks to the estimation of the our structural model, we present some simulations of counterfactual policy experiments like the change of ownership of some products between manufacturers.

Keywords: collusion; competition; differentiated products; double marginalization; manufacturers; non nested tests.; retailers; two part tariffs; vertical contracts; water (search for similar items in EconPapers)
JEL-codes: C12 C33 L13 L81 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-agr, nep-com, nep-mic and nep-mkt
Date: 2006-12
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Related works:
Working Paper: Two-Part Tariffs versus Linear Pricing Between Manufacturers and Retailers: Empirical Tests on Differentiated Products Markets (2006)
Working Paper: Two-part tariffs versus linear pricing between manufacturers and retailers: empirical tests on differentiated products markets (2006)
Working Paper: Two-Part Tariffs versus Linear Pricing between Manufacturers and Retailers: Empirical Tests on Differentiated Products Markets (2006)
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