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Predatory Accommodation: Below-Cost Pricing without Exclusion in Intermediate Goods Markets

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  • Leslie M. Marx
  • Greg Shaffer
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    Abstract

    We show that below-cost pricing can arise in intermediate goods markets when a monopolist retailer negotiates sequentially with two suppliers of substitute products. Below-cost pricing by one supplier allows the retailer to extract rents from the second supplier. Thus, the retailer and one supplier can increase their joint profit at the expense of the second supplier. We consider the welfare implications of below-cost pricing (welfare can increase or decrease as a result of below-cost pricing) and provide suggestions for when the courts should view below-cost pricing in intermediate goods markets as anticompetitive and when they should not.

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    Bibliographic Info

    Article provided by The RAND Corporation in its journal RAND Journal of Economics.

    Volume (Year): 30 (1999)
    Issue (Month): 1 (Spring)
    Pages: 22-43

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    Handle: RePEc:rje:randje:v:30:y:1999:i:spring:p:22-43

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    Cited by:
    1. Kyle Bagwell & Robert W. Staiger, 2004. "Backward Stealing and Forward Manipulation in the WTO," NBER Working Papers 10420, National Bureau of Economic Research, Inc.
    2. Roman Inderst & Christian Wey, 2001. "Bargaining, Mergers, and Technology Choice in Bilaterally Oligopolistic Industries," CIG Working Papers, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG) FS IV 01-19, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    3. von Schlippenbach, Vanessa & Wey, Christian, 2011. "One-stop shopping behavior, buyer power, and upstream merger incentives," DICE Discussion Papers, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) 27, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Robert Innes & Stephen F. Hamilton, 2009. "Vertical restraints and horizontal control," RAND Journal of Economics, RAND Corporation, RAND Corporation, vol. 40(1), pages 120-143.
    5. Philippe Choné & Laurent Linnemer, 2014. "Nonlinear Pricing and Exclusion : I. Buyer Opportunism," Working Papers, Centre de Recherche en Economie et Statistique 2014-16, Centre de Recherche en Economie et Statistique.
    6. Philippe Choné & Laurent Linnemer, 2011. "Leaving the Door Ajar : Nonlinear Pricing by a Dominant Firm," Working Papers, Centre de Recherche en Economie et Statistique 2011-16, Centre de Recherche en Economie et Statistique.
    7. Caprice, Stéphane & von Schlippenbach, Vanessa, 2013. "One-stop shopping as a cause of slotting fees: A rent-shifting mechanism," DICE Discussion Papers, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE) 97, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    8. Philippe Choné & Laurent Linnemer, 2012. "Nonlinear Pricing as Exclusionary Conduct," Working Papers, Centre de Recherche en Economie et Statistique 2012-11, Centre de Recherche en Economie et Statistique.

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