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Market Share Discounts and Investment Incentives

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Author Info

  • Sloev, Igor

Abstract

The paper investigates pro- and anticompetitive e¤ects of the use of market share discounts (MSD�s). While MSD�s can be used for exploiting a dominant position and may lead to a welfare reduction, MSD�s also can serve as an e¢ cient device for the creation of incentives. Particularly, if a �nal demand for an upstream manufacturer�s good depends on a promotional e¤ort of a retailer, the manufacturer can e¤ectively use MSD�s to induce an optimal level of the retailer�s e¤ort. Moreover, it is possible that MSD�s have a positive impact both on the consumers�surplus and the total industry pro�ts. Thus the use of MSD�s should not be treated as an anticompetitive practice a priori, but rather it has to be judged on a case-by-case basis.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 13990.

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Date of creation: 2007
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Handle: RePEc:pra:mprapa:13990

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Related research

Keywords: market-share discounts; vertical restraints; incentives;

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References

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  1. Katz, Michael L., 1989. "Vertical contractual relations," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 11, pages 655-721 Elsevier.
  2. Mathewson, G Frank & Winter, Ralph A, 1987. "The Competitive Effects of Vertical Agreements: Comment," American Economic Review, American Economic Association, vol. 77(5), pages 1057-62, December.
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Cited by:
  1. Ugur Akgun & Ioana Chioveanu, 2012. "Loyalty Discounts," CEDI Discussion Paper Series 12-07, Centre for Economic Development and Institutions(CEDI), Brunel University.

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