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Raising rivals’ cost through buyer power

Markus Dertwinkel-Kalt (), Justus Haucap () and Christian Wey ()

Economics Letters, 2015, vol. 126, issue C, 181-184

Abstract: We re-examine the view that a ban on price discrimination in input markets is particularly desirable in the presence of buyer power. This argument crucially depends on an inverse relationship between downstream firms’ profits and the uniform input price. Assuming different input efficiencies among downstream firms, we derive a necessary and sufficient condition such that a higher input price benefits a subset of relatively efficient downstream firms. In such instances, consumers may be better off if discriminatory pricing is feasible.

Keywords: Price discrimination; Buyer power; Raising rivals’ cost (search for similar items in EconPapers)
JEL-codes: L13 D43 K31 (search for similar items in EconPapers)
Date: 2015
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