Competition or Collusion? Negotiating Discounts Off Posted Prices

Alexander Raskovich
Additional contact information
Alexander Raskovich: Economic Analysis Group, Antitrust Division, Department of Justice

No 200601, EAG Discussions Papers from Department of Justice, Antitrust Division

Abstract: Opportunities for buyers to negotiate discounts can blunt competition in the initial posting of prices. It is always an equilibrium for identical suppliers to post price at the common marginal cost. If few buyers have opportunities to bargain, this equilibrium is unique. If many buyers have bargaining opportunities, however, a second equilibrium emerges in which suppliers post the monopoly price and then negotiate discounts individually with buyers. In this equilibrium, discounted prices are above marginal cost and profits increase with concentration. Advance price announcements may help suppliers coordinate onto their preferred equilibrium of posting the monopoly price.

JEL-codes: C71 C78 L13 L41 (search for similar items in EconPapers)
Pages: 24 pages
Date: 2006-02
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://www.justice.gov/atr/public/eag/221873.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:doj:eagpap:200601

Access Statistics for this paper

More papers in EAG Discussions Papers from Department of Justice, Antitrust Division Department of Justice Antitrust Division 450 Fifth Street NW Washington, DC 20530. Contact information at EDIRC.
Bibliographic data for series maintained by Tung Vu ().