IDEAS home Printed from https://ideas.repec.org/a/bla/jemstr/v13y2004i3p429-459.html

All‐Units Discounts in Retail Contracts

Author

Listed:
  • Sreya Kolay
  • Greg Shaffer
  • Janusz A. Ordover

Abstract

All‐units discounts in retail contracts refer to discounts that lower a retailer's wholesale price on every unit purchased when the retailer's purchases equal or exceed some quantity threshold. These discounts pose a challenge to economic theory because it is difficult to understand why a manufacturer ever would charge less for a larger order if its intentions were benign. In this paper, we show that all‐units discounts may profitably arise absent any exclusionary motive. All‐units discounts eliminate double marginalization in a complete information setting, and they extract more profit than would a menu of two‐part tariffs in the standard incomplete information setting with two types of buyers. All‐units discounts may improve or may reduce welfare (relative to menus of two‐part tariffs) depending on demand parameters.

Suggested Citation

  • Sreya Kolay & Greg Shaffer & Janusz A. Ordover, 2004. "All‐Units Discounts in Retail Contracts," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(3), pages 429-459, September.
    • Handle: RePEc:bla:jemstr:v:13:y:2004:i:3:p:429-459
    DOI: 10.1111/j.1430-9134.2004.00018.x
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/j.1430-9134.2004.00018.x
    Download Restriction: no
    File URL: https://libkey.io/10.1111/j.1430-9134.2004.00018.x?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    2. Robert D. Willig, 1978. "Pareto-Superior Nonlinear Outlay Schedules," Bell Journal of Economics, The RAND Corporation, vol. 9(1), pages 56-69, Spring.
    3. Stephen W. Salant, 1989. "When is Inducing Self-Selection Suboptimal for a Monopolist?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 104(2), pages 391-397.
    4. K. Sridhar Moorthy, 1987. "Comment—Managing Channel Profits: Comment," Marketing Science, INFORMS, vol. 6(4), pages 375-379.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sreya Kolay & Greg Shaffer, 2003. "Bundling and Menus of Two‐Part Tariffs," Journal of Industrial Economics, Wiley Blackwell, vol. 51(3), pages 383-403, September.
    2. J. Miguel Villas-Boas, 1998. "Product Line Design for a Distribution Channel," Marketing Science, INFORMS, vol. 17(2), pages 156-169.
    3. Tian Xia & Richard Sexton, 2010. "Brand or Variety Choices and Periodic Sales as Substitute Instruments for Monopoly Price Discrimination," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 36(4), pages 333-349, June.
    4. Kunter, Marcus, 2012. "Coordination via cost and revenue sharing in manufacturer–retailer channels," European Journal of Operational Research, Elsevier, vol. 216(2), pages 477-486.
    5. Staahl Gabrielsen, Tommy & Johansen, Bjørn Olav & Shaffer, Greg, 2018. "When is Double Marginalization a Problem?," Working Papers in Economics 7/18, University of Bergen, Department of Economics.
    6. Sreya Kolay & Greg Shaffer, 2022. "Slotting Fees and Price Discrimination in Retail Channels," Marketing Science, INFORMS, vol. 41(6), pages 1145-1162, November.
    7. Arulanantha Prabu Ponnachiyur Maruthasalam & Ganesh Balasubramanian, 2026. "When to fly solo? Manufacturer’s direct-to-consumer channel strategy in the face of store brand competition," Electronic Commerce Research, Springer, vol. 26(2), pages 2275-2310, April.
    8. Shantia, Ali & Aflaki, Sam & Masini, Andrea, 2021. "Contracting for technology improvement: The effect of asymmetric bargaining power and investment uncertainty," European Journal of Operational Research, Elsevier, vol. 293(2), pages 481-494.
    9. A. A. Tsay & W. S. Lovejoy, 1999. "Quantity Flexibility Contracts and Supply Chain Performance," Manufacturing & Service Operations Management, INFORMS, vol. 1(2), pages 89-111.
    10. Imenkamp, Nico & Wey, Christian, 2026. "When wholesale prices fall short: The RPM problem revisited," DICE Discussion Papers 439, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    11. Christos Constantatos & Stylianos Perrakis, 1995. "Différenciation verticale et structure du marché," L'Actualité Economique, Société Canadienne de Science Economique, vol. 71(1), pages 71-98.
    12. Carla Marchese & Alberto Cassone, 2000. "Tax Amnesty as Price-Discriminating Behavior by a Monopolistic Government," European Journal of Law and Economics, Springer, vol. 9(1), pages 21-32, January.
    13. Navajas Fernando, 2023. "Electricity rate structure design in Latin America: Where do we stand? Where should we go?," Asociación Argentina de Economía Política: Working Papers 4676, Asociación Argentina de Economía Política.
    14. Wu, Chongqi & Mallik, Suman, 2010. "Cross sales in supply chains: An equilibrium analysis," International Journal of Production Economics, Elsevier, vol. 126(2), pages 158-167, August.
    15. Long Gao & Birendra K. Mishra, 2019. "The Role of Market Evolution in Channel Contracting," Management Science, INFORMS, vol. 67(5), pages 2432-2441, May.
    16. Belleflamme,Paul & Peitz,Martin, 2015. "Industrial Organization," Cambridge Books, Cambridge University Press, number 9781107069978, June.
    17. Xi Li & Yan Xiong, 2026. "The Strength of Weak Commitments: A Theory of Price Preannouncements," Management Science, INFORMS, vol. 72(2), pages 1054-1071, February.
    18. Greg Shaffer & Florian Zettelmeyer, 2004. "Advertising in a Distribution Channel," Marketing Science, INFORMS, vol. 23(4), pages 619-628, November.
    19. Ali Shantia & Sam Aflaki & Andrea Masini, 2015. "Energy Efficiency Contracting in Supply Chains Under Asymmetric Bargaining Power," Working Papers hal-02002717, HAL.
    20. Long Gao & Liang Guo & Adem Orsdemir, 2021. "Dual‐Channel Distribution: The Case for Cost Information Asymmetry," Production and Operations Management, Production and Operations Management Society, vol. 30(2), pages 494-521, February.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:jemstr:v:13:y:2004:i:3:p:429-459. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.kellogg.northwestern.edu/research/journals/JEMS/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.