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Input price discrimination with secret linear contracting

Ioannis Pinopoulos

Discussion Paper Series from Department of Economics, University of Macedonia

Abstract: We study the welfare effects of input price discrimination when an unconstrained upstream supplier uses linear contracts that are unobservable by downstream firms. With homogeneous final goods, we show that banning input price discrimination decreases welfare. This finding is in contrast to that in the existing literature that considers observable linear contracts. When final goods are sufficiently differentiated, it is shown that banning input price discrimination increases welfare. This result is in contrast to that in the existing literature that considers unobservable two-part tariff contracts.

Keywords: Input price discrimination; linear contracts; welfare. (search for similar items in EconPapers)
JEL-codes: D43 L11 L42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-cta and nep-mic
Date: 2018-01, Revised 2018-01
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