EconPapers    
Economics at your fingertips  
 

Multilateral Vertical Contracting with an Alternative Supply: The Welfare Effects of a Ban on Price Discrimination

Stephane Caprice

Review of Industrial Organization, 2006, vol. 28, issue 1, 63-80

Abstract: Rey and Tirole [Handbook of Industrial Organization. Amsterdam: Elsevier (2005)] considered a model in which a monopolist sells to downstream firms using nonlinear contracts. They showed that banning price discrimination fully restores the supplier’s ability to leverage its monopoly power by enabling it to commit not to offer side discounts. I show that the situation changes when the supplier competes against a fringe of less efficient rivals rather than being a monopolist. Then banning price discrimination may cause per-unit prices to fall and welfare to increase. The dominant supplier can take advantage of a strategic bargaining effect: reducing the per-unit price makes the outside option of buying from the fringe less profitable, allowing the dominant supplier to extract more bargaining surplus through the fixed fee. Copyright Springer 2006

Keywords: bargaining effect; bilateral oligopoly; price discrimination; vertical contracting; K21; L13; L42 (search for similar items in EconPapers)
Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36) Track citations by RSS feed

Downloads: (external link)
http://hdl.handle.net/10.1007/s11151-006-0008-6 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:revind:v:28:y:2006:i:1:p:63-80

Ordering information: This journal article can be ordered from
http://www.springer. ... on/journal/11151/PS2

DOI: 10.1007/s11151-006-0008-6

Access Statistics for this article

Review of Industrial Organization is currently edited by L.J. White

More articles in Review of Industrial Organization from Springer, The Industrial Organization Society Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

 
Page updated 2021-01-17
Handle: RePEc:kap:revind:v:28:y:2006:i:1:p:63-80