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Facilitating Practices: The Effects of Advance Notice and Best-Price Policies

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  • Charles A. Holt
  • David T. Scheffman

Abstract

Even if firms in a market choose discount prices noncooperatively, the use of most-favored customer and meet-or-release contracts enables those firms to adopt quantity-choice strategies. Consequently, there can be a range of list prices that are impervious to unilateral nonselective discounts, but this range does not include prices above the level determined in a Cournot equilibrium. The practice of advance public notification of list-price increases can facilitate the establishment of such supracompetitive list prices, as was argued in the recent FTC Ethyl case. The possibility of offering discounts selectively results in a much more competitive situation.

Suggested Citation

  • Charles A. Holt & David T. Scheffman, 1987. "Facilitating Practices: The Effects of Advance Notice and Best-Price Policies," RAND Journal of Economics, The RAND Corporation, vol. 18(2), pages 187-197, Summer.
    • Handle: RePEc:rje:randje:v:18:y:1987:i:summer:p:187-197
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