IDEAS home Printed from https://ideas.repec.org/p/ags/uwssri/292687.html
   My bibliography  Save this paper

Prohibiting Prices Below Cost When Product Loyalty Is Endogenous

Author

Listed:
  • Holmes, Thomas J.

Abstract

This paper presents a demand-side rationalization for the policy of prohibiting firms from setting prices below marginal cost. A monopoly model is presented in which future demand for the product depends on the level of current investment by consumers in capital which is used in conjunction with the product. The higher the current price, the lower the equilibrium investment in capital and the lower the future equilibrium price. Due to this tradeoff, consumers may benefit from policy intervention to increase the current price. Conditions are found under which the policy of prohibiting prices below cost is welfare improving.

Suggested Citation

  • Holmes, Thomas J., 1987. "Prohibiting Prices Below Cost When Product Loyalty Is Endogenous," SSRI Workshop Series 292687, University of Wisconsin-Madison, Social Systems Research Institute.
    • Handle: RePEc:ags:uwssri:292687
    DOI: 10.22004/ag.econ.292687
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/292687/files/uwmad-0039.PDF
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.292687?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
    ---><---

    More about this item

    Keywords

    Research Methods/ Statistical Methods;

    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:ags:uwssri:292687. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/ssuwius.html .

    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.