No 275458, Foerder Institute for Economic Research Working Papers from Tel-Aviv University > Foerder Institute for Economic Research
Suppose that a representative downstream firm must buy relationship-specific capital before an upstream monopolist is privately informed of its unit costs. We show that the upstream firm will write a contract before the downstream firm invests, specifying a maximum (list) price which may be discounted when costs are low. This model therefore rationalizes transactions/list pricing: a prevalent mode of inter-firm trading. We use our results to explain Stigler and Kindahl's findings on medium-term price dynamics.
Keywords: Demand and Price Analysis; Financial Economics (search for similar items in EconPapers)
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Journal Article: Transactions/List Pricing (1990)
Working Paper: TRANSACTIONS/LIST PRICING (1988)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:isfiwp:275458
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