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Dual Pricing in a Model of Sales

Author

Listed:
  • Nicolas Schutz
  • Anton Sobolev

Abstract

We study the competitve effects of dual pricing, a vertical restraint that involves charging a distributor different prices for units intended to be resold online versus offline. We develop a model in which a manufacturer contracts with hybrid retailers selling both in-store and online. We find that, by eliminating wasteful price dispersion, dual pricing allows the manufacturer to induce the industry monopoly outcome, whereas uniform pricing does not. Despite this, a ban on dual pricing has negative welfare effects if the online market is small, if the offline consumers' search costs are high, and if the monopoly pass-through is high.

Suggested Citation

  • Nicolas Schutz & Anton Sobolev, 2025. "Dual Pricing in a Model of Sales," CRC TR 224 Discussion Paper Series crctr224_2025_678v2, University of Bonn and University of Mannheim, Germany, revised Jun 2025.
    • Handle: RePEc:bon:boncrc:crctr224_2025_678v2
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    File URL: https://www.crctr224.de/research/discussion-papers/archive/dp678
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    More about this item

    Keywords

    dual pricing; price dispersion; consumer search; vertical restraints;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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