Competitive quantity discounts

Giacomo Calzolari () and Vincenzo Denicolo' ()

No 8144, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: We analyze the effects of competition with quantity discounts in a duopoly model with asymmetric firms. Consumers are privately informed about demand, so firms use quantity discounts as a price discrimination device. However, a dominant firm may also use quantity discounts to weaken or eliminate its competitor. We analyze the effects of quantity discounts on firms' profits and consumer surplus. Our main finding is that quantity discounts can decrease social welfare (i.e., the sum of producers' and consumers' surplus) for a small set of parameter values.

Keywords: Dominant firm; Exclusion; Non linear pricing; Quantity discounts (search for similar items in EconPapers)
JEL-codes: D42 D82 L42 (search for similar items in EconPapers)
Date: 2010-12
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Citations: View citations in EconPapers (1)

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