The Welfare Effects of Forbidding Discriminatory Discounts: A Secondary Line Analysis of Robinson-Patman
AbstractWe examine the welfare effects of forbidding price discrimination in intermediate goods markets when firms can bargain over terms of their nonlinear supply contracts. In particular, our focus is on secondary line injury to competition under three interpretations of what it means to forbid price discrimination. We find that in each case, forbidding discriminatory discounts renders retailer bargaining power useless in mitigating manufacturer market power. As a result, all retailers end up paying higher input prices, and all retail prices rise. We show by example that the welfare loss can be substantial. Copyright 1994 by Oxford University Press.
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Bibliographic InfoArticle provided by Oxford University Press in its journal Journal of Law, Economics and Organization.
Volume (Year): 10 (1994)
Issue (Month): 2 (October)
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- Roman Inderst & Tommaso Valletti, 2006.
"Price Discrimination in Input Markets,"
CEIS Research Paper
73, Tor Vergata University, CEIS.
- James Langenfeld & Wenqing Li & George Schink, 2003. "Economic Literature on Price Discrimination and its Application to the Uniform Pricing of Gasoline," International Journal of the Economics of Business, Taylor and Francis Journals, vol. 10(2), pages 179-193.
- repec:ebl:ecbull:v:12:y:2007:i:31:p:1-8 is not listed on IDEAS
- Inderst, Roman & Wey, Christian, 2005.
"How Strong Buyers Spur Upstream Innovation,"
CEPR Discussion Papers
5365, C.E.P.R. Discussion Papers.
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