Market power, price discrimination, and allocative efficiency in intermediate-goods markets
We consider a monopolistic supplier's optimal choice of two-part tariff contracts when downstream firms are asymmetric. We find that the optimal discriminatory contracts amplify differences in downstream firms' competitiveness. Firms that are larger-either because they are more efficient or because they sell a superior product-obtain a lower wholesale price than their rivals. This increases allocative efficiency by favoring the more productive firms. In contrast, we show that a ban on price discrimination reduces allocative efficiency and can lead to higher wholesale prices for all firms. As a result, consumer surplus, industry profits, and welfare are lower. Copyright (c) 2009, RAND.
Volume (Year): 40 (2009)
Issue (Month): 4 ()
|Contact details of provider:|| Postal: 1776 Main Street, P.O. Box 2138, Santa Monica, California 90407-2138|
Web page: http://www.blackwellpublishing.com/journal.asp?ref=0741-6261
More information through EDIRC
|Order Information:||Web: http://www.blackwellpublishing.com/journal.asp?ref=0741-6261|