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Loss-leaders Banning Laws as Vertical Restraints

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  • Marie-Laure Allain

    (Crest)

  • Claire Chambolle

    (Crest)

Abstract

This paper explores the indirect in‡ationary mechanism allowed byloss leaders banning laws. In a model where a monopolist producer sells his productthrough vertically separated and di¤erentiated retailers, we show that the ban of resaleat a loss can be used strategically by the producer to increase his wholesale price andpay the retailers through negotiated listing fees, thus raising his pro…t. The ban turnswholesale prices into ‡oor prices, thus increasing resale price and lessening consumers’welfare. These results are robust if the listing fees are two-part tari¤.

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Bibliographic Info

Paper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2004-19.

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Date of creation: 2004
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Handle: RePEc:crs:wpaper:2004-19

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References

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  1. Claire Chambolle, 2000. "Stratégies de revente à perte et réglementation," Working Papers 2000-52, Centre de Recherche en Economie et Statistique.
  2. Greg Shaffer, 1991. "Slotting Allowances and Resale Price Maintenance: A Comparison of Facilitating Practices," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 120-135, Spring.
  3. Milgrom, Paul & Roberts, John, 1982. "Limit Pricing and Entry under Incomplete Information: An Equilibrium Analysis," Econometrica, Econometric Society, vol. 50(2), pages 443-59, March.
  4. Stiglitz, J. & Rey, P., 1988. "Vertical Restraints And Producers' Competition," Papers 13, Princeton, Woodrow Wilson School - Discussion Paper.
  5. McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-30, March.
  6. Horn, H. & Wolinsky, A., 1988. "Bilateral Monopolies And Incentives For Merger," Papers 410, Stockholm - International Economic Studies.
  7. Bliss, Christopher, 1988. "A Theory of Retail Pricing," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 375-91, June.
  8. Bergès-Sennou Fabian & Bontems Philippe & Réquillart Vincent, 2004. "Economics of Private Labels: A Survey of Literature," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 2(1), pages 1-25, February.
  9. Lal, Rajiv & Matutes, Carmen, 1994. "Retail Pricing and Advertising Strategies," The Journal of Business, University of Chicago Press, vol. 67(3), pages 345-70, July.
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Citations

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Cited by:
  1. Rey, Patrick & Chen, Zhijun, 2010. "Loss Leading as an Exploitative Practice," TSE Working Papers 10-218, Toulouse School of Economics (TSE), revised Dec 2011.
  2. Vanessa von Schlippenbach, 2008. "Complementarities, Below-Cost Pricing, and Welfare Losses," Discussion Papers of DIW Berlin 788, DIW Berlin, German Institute for Economic Research.
  3. Dubois, Pierre & Jodar-Rosell, Sandra, 2010. "Price and Brand Competition between Differentiated Retailers: A Structural Econometric Model," IDEI Working Papers 604, Institut d'Économie Industrielle (IDEI), Toulouse.
  4. David Burch & Geoffrey Lawrence & Libby Hattersley, 2013. "Watchdogs and ombudsmen: monitoring the abuse of supermarket power," Agriculture and Human Values, Springer, vol. 30(2), pages 259-270, June.
  5. Allain, Marie-Laure & Chambolle, Claire, 2011. "Anti-competitive effects of resale-below-cost laws," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 373-385, July.
  6. Célérier, C., 2009. "Forecasting inflation in France," Working papers 262, Banque de France.

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