Dual Pricing in a Model of Sales

Nicolas Schutz and Anton Sobolev

No 20367, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We study the competitive effects of dual pricing, a vertical restraint that involves charging a distributor different prices for units intended to be resold online versus offline. We develop a model in which a manufacturer contracts with hybrid retailers selling both in-store and online. We find that, by eliminating wasteful price dispersion, dual pricing allows the manufacturer to induce the industry monopoly outcome, whereas uniform pricing does not. Despite this, a ban on dual pricing has negative welfare effects if the online market is small, if the offline consumers' search costs are high, and if the monopoly pass-through is high.

Keywords: dual pricing; Price dispersion; Consumer search; Vertical restraints (search for similar items in EconPapers)
JEL-codes: D43 D83 L13 L42 (search for similar items in EconPapers)
Date: 2025-06
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