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Competitive quantity discounts

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Author Info

  • Calzolari, Giacomo
  • Denicolò, Vincenzo

Abstract

We analyze the effects of competition with quantity discounts in a duopoly model with asymmetric firms. Consumers are privately informed about demand, so firms use quantity discounts as a price discrimination device. However, a dominant firm may also use quantity discounts to weaken or eliminate its competitor. We analyze the effects of quantity discounts on firms' profits and consumer surplus. Our main finding is that quantity discounts can decrease social welfare (i.e., the sum of producers' and consumers' surplus) for a small set of parameter values.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8144.

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Date of creation: Dec 2010
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Handle: RePEc:cpr:ceprdp:8144

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Related research

Keywords: Dominant firm; Exclusion; Non linear pricing; Quantity discounts;

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References

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  1. Dennis W. Carlton & Patrick Greenlee & Michael Waldman, 2008. "Assessing the Anticompetitive Effects of Multiproduct Pricing," NBER Working Papers 14199, National Bureau of Economic Research, Inc.
  2. repec:bla:restud:v:77:y:2010:i:1:p:30-60 is not listed on IDEAS
  3. Dennis W. Carlton & Michael Waldman, 2008. "Safe Harbors for Quantity Discounts and Bundling," EAG Discussions Papers 200801, Department of Justice, Antitrust Division.
  4. David Martimort & Lars Stole, 2009. "Market participation in delegated and intrinsic common-agency games," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 78-102.
  5. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
  6. David Spector, 2005. "Loyalty Rebates: An Assessment of Competition Concerns and a Proposed Structured Rule of Reason," CPI Journal, Competition Policy International, vol. 1.
  7. Calzolari, Giacomo & Denicolo, Vincenzo, 2009. "Competition with exclusive contracts and market-share discounts," CEPR Discussion Papers 7613, C.E.P.R. Discussion Papers.
  8. Armstrong, Mark, 2006. "Price discrimination," MPRA Paper 4693, University Library of Munich, Germany.
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Cited by:
  1. Calzolari, Giacomo & Denicolò, Vincenzo, 2011. "On the anti-competitive effects of quantity discounts," International Journal of Industrial Organization, Elsevier, vol. 29(3), pages 337-341, May.

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