CONTINUOUS CROSS SUBSIDIES AND QUANTITY RESTRICTIONS -super-*
AbstractThis article provides a model of loss leader pricing and quantity restrictions for a competitive multiproduct industry when individual consumers have continuous (and independent) demands for the set of available goods. Utilizing a generalization of the model proposed by Bliss  , we demonstrate the importance of consumer heterogeneity for the existence of cross subsidies when there is complete information and individual consumers have smooth, downward sloping demands. Continuous cross subsidies arising from consumer heterogeneity are also shown to exist in Hotelling models. Our use of continuous rather than 'unit' demands allows us to analyze issues related to welfare, which in turn exposes a strong incentive for the firm to place binding quantity restrictions on consumers. We also show how the presence of quantity restrictions can be used to distinguish between continuous cross subsidies arising from heterogeneous consumers versus those arising from classic demand complementarity with homogeneous agents. Copyright 2008 The Authors. Journal compilation 2008 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal The Journal of Industrial Economics.
Volume (Year): 56 (2008)
Issue (Month): 4 (December)
Contact details of provider:
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0022-1821
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Zhijun Chen & Patrick Rey, 2012.
"Loss Leading as an Exploitative Practice,"
American Economic Review,
American Economic Association, vol. 102(7), pages 3462-82, December.
- Rey, Patrick & Chen, Zhijun, 2010. "Loss Leading as an Exploitative Practice," IDEI Working Papers 658, Institut d'Économie Industrielle (IDEI), Toulouse, revised Dec 2011.
- Zhijun Chen & Patrick Rey, 2010. "Loss Leading as an Exploitative Practice," Working Papers hal-00540724, HAL.
- Rey, Patrick & Chen, Zhijun, 2010. "Loss Leading as an Exploitative Practice," TSE Working Papers 10-218, Toulouse School of Economics (TSE), revised Dec 2011.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.