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Nonlinear pricing and exclusion: I. buyer opportunism


  • Philippe Choné
  • Laurent Linnemer


type="main"> We study the exclusionary properties of nonlinear price-quantity schedules in an Aghion-Bolton style model with elastic demand and product differentiation. We distinguish three regimes, depending on whether and how the price charged by the dominant firm depends on the quantity purchased from the rival firm. We find that the supply of rival good is distorted downward. Moreover, given the quantity supplied from the rival, the buyer may opportunistically purchase inefficiently many units from the dominant firm to pocket quantity rebates. We show that the possibility for the buyer to dispose of unconsumed units attenuates the opportunism problem and limits the exclusionary effects of nonlinear pricing.

Suggested Citation

  • Philippe Choné & Laurent Linnemer, 2015. "Nonlinear pricing and exclusion: I. buyer opportunism," RAND Journal of Economics, RAND Corporation, vol. 46(2), pages 217-240, June.
  • Handle: RePEc:bla:randje:v:46:y:2015:i:2:p:217-240

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    References listed on IDEAS

    1. Philippe Choné & Laurent Linnemer, 2016. "Nonlinear pricing and exclusion:II. Must-stock products," RAND Journal of Economics, RAND Corporation, vol. 47(3), pages 631-660, August.
    2. Philippe Choné & Laurent Linnemer, 2012. "Nonlinear Pricing as Exclusionary Conduct," Working Papers 2012-11, Center for Research in Economics and Statistics.
    3. Giacomo Calzolari & Vincenzo Denicol?, 2013. "Competition with Exclusive Contracts and Market-Share Discounts," American Economic Review, American Economic Association, vol. 103(6), pages 2384-2411, October.
    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.
    5. Eberhard Feess & Ansgar Wohlschlegel, 2010. "All-Unit Discounts and the Problem of Surplus Division," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 37(3), pages 161-178, November.
    6. Roman Inderst & Greg Shaffer, 2010. "Market-share contracts as facilitating practices," RAND Journal of Economics, RAND Corporation, vol. 41(4), pages 709-729.
    7. Jullien, Bruno, 2000. "Participation Constraints in Adverse Selection Models," Journal of Economic Theory, Elsevier, vol. 93(1), pages 1-47, July.
    8. 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.
    9. David Martimort & Lars Stole, 2009. "Market participation in delegated and intrinsic common-agency games," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 78-102.
    10. 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.
    11. Adrian Majumdar & Greg Shaffer, 2009. "Market-Share Contracts with Asymmetric Information," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(2), pages 393-421, June.
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    Cited by:

    1. Zhijun Chen & Greg Shaffer, 2016. "Are Market-Share Contracts a Poor Man’s Exclusive Dealing?," Monash Economics Working Papers 44-16, Monash University, Department of Economics.
    2. Renato Gomes & Jean-Marie Lozachmeur & Alessandro Pavan, 2014. "Differential Taxation and Occupational Choice," Discussion Papers 1577, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    3. Enrique Ide & Juan-Pablo Montero & Nicolás Figueroa, 2016. "Discounts as a Barrier to Entry," American Economic Review, American Economic Association, vol. 106(7), pages 1849-1877, July.

    More about this item

    JEL classification:

    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D86 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Economics of Contract Law


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