Price Coordination under List Pricing and Discounting: Experimental Evidence

Roberto González, Praveen Kujal (), Miguel Ropero-García and Román Fossati
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Roberto González: BSB Dijon
Praveen Kujal: Middlesex University Business School; Chapman University
Miguel Ropero-García: Universidad de Málaga
Román Fossati: Facultad de Ciencias Económicas, UNICEN

Working Papers from Chapman University, Economic Science Institute

Abstract: List-pricing and discounting is common in both retail and wholesale markets. Its interpretation amongst competition authorities varies from being procompetitive to collusion facilitating. We experimentally test how list pricing and discounting impact prices in a capacity constrained Bertrand-Edgeworth duopoly with symmetric and asymmetric firms facing constant marginal costs. We find that, relative to the symmetric baseline experiments, list pricing and discounting generate higher equilibrium prices for (symmetric) firms. Prices in the asymmetric-list price duopoly are also higher, however, the effect is much smaller than under symmetry. The introduction of asymmetry results in higher prices. The smaller firms gain more from list pricing and use it to signal price commitment. We also find that the announcement of exactly the same list prices signals sellers´ intentions to set the same market prices. When list prices are different, then the minimum of the list prices works as a coordination device in the market prices stage. Setting the same list prices in the first stage leads to coordination in market prices and to significantly higher prices.

Keywords: List pricing; Discounts; Capacity Constraints; Mixed Strategies; Pure Strategies (search for similar items in EconPapers)
JEL-codes: C9 L0 L1 L11 L13 L4 (search for similar items in EconPapers)
Date: 2025
New Economics Papers: this item is included in nep-com, nep-exp and nep-gth
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Persistent link: https://EconPapers.repec.org/RePEc:chu:wpaper:25-03

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