Is List Pricing and Discounting Procompetitive? Tacit Collusion in a Bertrand-Edgeworth Duopoly

Roman Fossati, Roberto Hernan Gonzalez and Praveen Kujal

No 4564, Asociación Argentina de Economía Política: Working Papers from Asociación Argentina de Economía Política

Abstract: List-pricing and discounting is a common practice in retail and wholesale markets. Under this pricing mechanism, a posted list price is offered to sellers in a prior stage which can then de discounted at a later in a second stage. The practice of list pricing and discounting is viewed as collusive theoretically, however, its interpretation amongst competition authorities varies from being pro-competitive to being a collusion facilitating device. We experimentally test how list pricing and discounting impact prices in a capacity constrained Bertrand-Edgeworth duopoly with symmetric and asymmetric firms. We find evidence of collusion under list pricing and discounting with symmetric as well as with asymmetric firms relative to a baseline case without the discounting stage.

JEL-codes: C9 L0 L1 L11 L13 L4 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2022-11
New Economics Papers: this item is included in nep-com, nep-ind and nep-reg
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