Limiting rival's efficiency via conditional discounts
This paper studies the impact of a dominant firm's conditional discounts on competitors' learning-by-doing. In a vertical context where a dominant upstream supplier and a competitive fringe sell their products to a single downstream firm, we analyze whether the dominant supplier prefers to offer a discount scheme, as in particular a quantity or market-share discount. In a dynamic setting with complete information and learning-by-doing, short-term market-share discounts and long-run contracts are more profitable to the dominant supplier than simple two-part tariffs or quantity discounts. We show that two-part tariffs as well as quantity discounts lead to more learning than market-share discounts, or long-term contracts. Thus, the dominant firm's contract choice restricts the competitive fringe's efficiency gain. Similar results occur for network effects.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Akgün Uğur & Chioveanu Ioana, 2013.
The B.E. Journal of Economic Analysis & Policy,
De Gruyter, vol. 13(2), pages 655-685, September.
- Ioana Chioveanu & Ugur Akgun, 2011. "Loyalty discounts," Working Papers. Serie AD 2011-03, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
- Calzolari, Giacomo & Denicolò, Vincenzo, 2011. "On the anti-competitive effects of quantity discounts," International Journal of Industrial Organization, Elsevier, vol. 29(3), pages 337-341, May.
- Mikko Packalen, 2011. "Market Share Exclusion," Working Papers 1103, University of Waterloo, Department of Economics, revised Aug 2011.
- David Mills, 2010. "Inducing Downstream Selling Effort with Market Share Discounts," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 17(2), pages 129-146.
- Rasmusen, Eric B & Ramseyer, J Mark & Wiley, John S, Jr, 1991. "Naked Exclusion," American Economic Review, American Economic Association, vol. 81(5), pages 1137-1145, December.
- Christian Ahlborn & David Bailey, 2006. "Discounts, Rebates and Selective Pricing by Dominant Firms: A Trans-Atlantic Comparison," Chapters,in: Handbook of Research in Trans-Atlantic Antitrust, chapter 7 Edward Elgar Publishing.
- John Sutton, 2001. "Technology and Market Structure: Theory and History," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262692643, July.
- Roman Inderst & Greg Shaffer, 2010. "Market-share contracts as facilitating practices," RAND Journal of Economics, RAND Corporation, vol. 41(4), pages 709-729.
- 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.
- Calzolari, Giacomo & Denicolò, Vincenzo, 2009. "Competition with exclusive contracts and market-share discounts," CEPR Discussion Papers 7613, C.E.P.R. Discussion Papers.
- 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, 09.
- Zhijun Chen & Greg Shaffer, 2014. "Naked exclusion with minimum-share requirements," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 64-91, 03.
- Can Erutku, 2006. "Rebates as incentives to exclusivity," Canadian Journal of Economics, Canadian Economics Association, vol. 39(2), pages 477-492, May.
- Adrian Majumdar & Greg Shaffer, 2009. "Market-Share Contracts with Asymmetric Information," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(2), pages 393-421, 06.
- Cabral, Luis M B & Riordan, Michael H, 1997. "The Learning Curve, Predation, Antitrust, and Welfare," Journal of Industrial Economics, Wiley Blackwell, vol. 45(2), pages 155-169, June. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:bav:wpaper:132_greer. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Rebecca Schrader)
If references are entirely missing, you can add them using this form.