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Consumer Strategies Limiting the Monopolist's Power: Multiple and Joint Purchases

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  • Ingela Alger

Abstract

I characterize the menu of bundles (price-quantity combinations) offered by a monopolist when consumers can buy several bundles, share bundles with others, or do both, in a two-type setting. I find that although perfect arbitrage prevents any price discrimination, partial arbitrage in the form of multiple or joint purchases may actually lead to more pronounced price discrimination than when consumers can only pick one single bundle. Further, clear predictions emerge for the price pattern, contrasting with the existing literature: with multiple purchases only, the firm offers strict quantity discounts; with joint purchase only, discounts are infeasible.

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  • Ingela Alger, 1999. "Consumer Strategies Limiting the Monopolist's Power: Multiple and Joint Purchases," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 736-757, Winter.
    • Handle: RePEc:rje:randje:v:30:y:1999:i:winter:p:736-757
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    Citations

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    Cited by:

    1. Simon P. Anderson & Régis Renault, 2011. "Price Discrimination," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 22, Edward Elgar Publishing.
    2. Sällström Matthews, S.E., 2007. "Multi-Purpose Consumption and Functional Differentiation: Why has the Vibrant Galleria replaced the Good Old Fashioned Department Store?," Cambridge Working Papers in Economics 0727, Faculty of Economics, University of Cambridge.
    3. Jeon, Doh-Shin & Menicucci, Domenico, 2014. "Buyer Group and Buyer Power When Sellers Compete," TSE Working Papers 14-543, Toulouse School of Economics (TSE), revised Nov 2017.
    4. Brian McManus, 2001. "Two‐Part Pricing with Costly Arbitrage," Southern Economic Journal, John Wiley & Sons, vol. 68(2), pages 369-386, October.
    5. Doh-Shin Jeon & Domenico Menicucci, 2017. "The Benefits of Diverse Preferences in Library Consortia," Journal of Industrial Economics, Wiley Blackwell, vol. 65(1), pages 105-135, March.
    6. Gans, Joshua S. & King, Stephen P., 2007. "Perfect price discrimination with costless arbitrage," International Journal of Industrial Organization, Elsevier, vol. 25(3), pages 431-440, June.
    7. Sällström, Susanna, 2009. "Functional Differentiation," CEPR Discussion Papers 7187, C.E.P.R. Discussion Papers.
    8. Hugh Sibly, 2017. "Pricing Strategies with Costly Customer Arbitrage," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 50(3), pages 345-366, May.
    9. Sibly, Hugh, 2010. "Non-Linear Pricing with Homogeneous Customers and Limited Unbundling," Working Papers 10448, University of Tasmania, Tasmanian School of Business and Economics, revised 01 Aug 2010.
    10. Hui Song & Hongkun Ma & Zimeng Ma, 2023. "Group‐buying with products of heterogeneous quality," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 2408-2423, June.
    11. Drew Vollmer, 2022. "Bundling with Resale," Journal of Industrial Economics, Wiley Blackwell, vol. 70(4), pages 913-938, December.
    12. Wu, Chien-Wei & Chiu, Hsien-Hung, 2016. "Price Discrimination Through Group Buying," Hitotsubashi Journal of Economics, Hitotsubashi University, vol. 57(1), pages 27-52, June.
    13. Ren Wang & Jie Hou & Hui Song, 2020. "Use prices as sales agents," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(7), pages 1349-1364, October.
    14. Georgia Kosmopoulou & Qihong Liu & Jie Shuai, 2016. "Customer poaching and coupon trading," Journal of Economics, Springer, vol. 118(3), pages 219-238, July.
    15. Jeon, Doh-Shin & Menicucci, Domenico, 2013. "When Is Building a Library Consortium Beneficial?," IDEI Working Papers 791, Institut d'Économie Industrielle (IDEI), Toulouse, revised 07 Apr 2014.

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