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Is List Pricing and Discounting Procompetitive? Tacit Collusion in a Bertrand-Edgeworth Duopoly

Author

Listed:
  • Roman Fossati
  • Roberto Hernan González
  • Praveen Kujal

Abstract

List-pricing and discounting is a common practice in retail and wholesale markets. Under this pricing mechanism, a posted list price is offered to sellers in a prior stage which can then de discounted at a later in a second stage. The practice of list pricing and discounting is viewed as collusive theoretically, however, its interpretation amongst competition authorities varies from being pro-competitive to being a collusion facilitating device. We experimentally test how list pricing and discounting impact prices in a capacity constrained Bertrand-Edgeworth duopoly with symmetric and asymmetric firms. We find evidence of collusion under list pricing and discounting with symmetric as well as with asymmetric firms relative to a baseline case without the discounting stage.

Suggested Citation

  • Roman Fossati & Roberto Hernan González & Praveen Kujal, 2022. "Is List Pricing and Discounting Procompetitive? Tacit Collusion in a Bertrand-Edgeworth Duopoly," Asociación Argentina de Economía Política: Working Papers 4564, Asociación Argentina de Economía Política.
    • Handle: RePEc:aep:anales:4564
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    References listed on IDEAS

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    1. Harrington, Joseph E. & Hernan Gonzalez, Roberto & Kujal, Praveen, 2016. "The relative efficacy of price announcements and express communication for collusion: Experimental findings," Journal of Economic Behavior & Organization, Elsevier, vol. 128(C), pages 251-264.
    2. 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.
    3. García Díaz, Antón & Hernán González, Roberto & Kujal, Praveen, 2009. "List pricing and discounting in a Bertrand-Edgeworth duopoly," International Journal of Industrial Organization, Elsevier, vol. 27(6), pages 719-727, November.
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    More about this item

    JEL classification:

    • C9 - Mathematical and Quantitative Methods - - Design of Experiments
    • L0 - Industrial Organization - - General
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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