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Nonlinear Pricing as Exclusionary Conduct

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  • Philippe Choné

    ()
    (Crest-LEI)

  • Laurent Linnemer

Abstract

We study the exclusionary properties of nonlinear pricing by dominant firms in a static environment. Optimal price schedules are nonlinear when the rivals’ sensitivity to competitive pressure varies with the “contestable share” of the market. When buyers can dispose of unconsumed units at no cost, and thus might purchase units they do not need, dominant firms are prevented from placing too much pressure on rivals, which limits the extent of inefficient exclusion. When disposal costs are large and sensitivity to competitive pressure is not monotonic in the contestable share, optimal price schedules may be locally decreasing and highly nonlinear

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Bibliographic Info

Paper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2012-11.

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Length: 56
Date of creation: Jun 2012
Date of revision:
Handle: RePEc:crs:wpaper:2012-11

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Keywords: Inefficient exclusion; buyer opportunism; disposal costs; quantity rebates; incomplete information;

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References

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  1. Jullien, Bruno, 2000. "Participation Constraints in Adverse Selection Models," Journal of Economic Theory, Elsevier, vol. 93(1), pages 1-47, July.
  2. Leslie M. Marx & Greg Shaffer, 1999. "Predatory Accommodation: Below-Cost Pricing without Exclusion in Intermediate Goods Markets," RAND Journal of Economics, The RAND Corporation, vol. 30(1), pages 22-43, Spring.
  3. Calzolari, Giacomo & Denicolo, Vincenzo, 2009. "Competition with exclusive contracts and market-share discounts," CEPR Discussion Papers 7613, C.E.P.R. Discussion Papers.
  4. Aghion, Philippe & Bolton, Patrick, 1987. "Contracts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 77(3), pages 388-401, June.
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Cited by:
  1. Philippe Choné & Laurent Linnemer, 2014. "Nonlinear Pricing and Exclusion: I. Buyer Opportunism," CESifo Working Paper Series 4873, CESifo Group Munich.
  2. Philippe Choné & Laurent Linnemer, 2014. "Nonlinear Pricing and Exclusion: II. Must-Stock Products," CESifo Working Paper Series 4874, CESifo Group Munich.

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