Price Discrimination in Input Markets: Quantity Discounts and Private Information

Fabian Herweg () and Daniel Müller

No 4202, CESifo Working Paper Series from CESifo

Abstract: We consider a monopolistic supplier’s optimal choice of wholesale tariffs when downstream firms are privately informed about their retail costs. Under discriminatory pricing, downstream firms that differ in their ex ante distribution of retail costs are offered different tariffs. Under uniform pricing, the same wholesale tariff is offered to all downstream firms. In contrast to the extant literature on price discrimination with nonlinear wholesale tariffs, we find that banning discriminatory wholesale contracts often improves welfare. This also holds if the manufacturer is not an unconstrained monopolist. Moreover, uniform pricing increases downstream investments in cost reduction in the long run.

Keywords: asymmetric information; input markets; quantity discounts; price discrimination; screening; vertical contracting (search for similar items in EconPapers)
JEL-codes: D43 L11 L42 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Price Discrimination in Input Markets: Quantity Discounts and Private Information (2014)
Working Paper: Price Discrimination in Input Markets: Quantity Discounts and Private Information (2013)
Working Paper: Price Discrimination in Input Markets: Quantity Discounts and Private Information (2013)
Working Paper: Price Discrimination in Input Markets: Quantity Discounts and Private Information (2011)
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