Competition with exclusive contracts and market-share discounts
We study the effects of exclusive contracts and market-share discounts (i.e., discounts conditioned on the share a firm receives of the customer’s total purchases) in an adverse selection model where firms supply differentiated products and compete in non-linear prices. We show that exclusive contracts intensify the competition among the firms, increasing consumer surplus, improving efficiency, and reducing profits. Firms would gain if these contracts were prohibited, but are caught in a prisoner’s dilemma if they are permitted. In this latter case, allowing firms to offer also market-share discounts unambiguously weakens competition, reducing efficiency and harming consumers. However, starting from a situation where exclusive contracts are prohibited, the effect of market-share discounts (which include exclusive contracts as a limiting case) is ambiguous.
|Date of creation:||Dec 2009|
|Contact details of provider:|| Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.|
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820
|Order Information:|| Email: |
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.:
- Jeanine Miklós‐Thal & Patrick Rey & Thibaud Vergé, 2011. "Buyer Power And Intrabrand Coordination," Journal of the European Economic Association, European Economic Association, vol. 9(4), pages 721-741, August.
- repec:adr:anecst:y:1994:i:34:p:03 is not listed on IDEAS
- Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
- Zhijun Chen & Patrick Rey, 2012.
"Loss Leading as an Exploitative Practice,"
American Economic Review,
American Economic Association, vol. 102(7), pages 3462-3482, December.
- Rey, Patrick & Chen, Zhijun, 2010. "Loss Leading as an Exploitative Practice," IDEI Working Papers 658, Institut d'Économie Industrielle (IDEI), Toulouse, revised Dec 2011.
- Zhijun Chen & Patrick Rey, 2010. "Loss Leading as an Exploitative Practice," Working Papers hal-00540724, HAL.
- Rey, Patrick & Chen, Zhijun, 2010. "Loss Leading as an Exploitative Practice," TSE Working Papers 10-218, Toulouse School of Economics (TSE), revised Dec 2011.
- Alessandro Pavan & Giacomo Calzolari, 2010.
"Truthful Revelation Mechanisms for Simultaneous Common Agency Games,"
American Economic Journal: Microeconomics,
American Economic Association, vol. 2(2), pages 132-190, May.
- Giacomo Calzolari & Alessandro Pavan, 2007. "Truthful Revelation Mechanisms for Simultaneous Common Agency Games," Discussion Papers 1458, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Alessandro Pavan & Giacomo Calzolari, 2008. "Truthful Revelation Mechanisms for Simultaneous Common Agency Games," Carlo Alberto Notebooks 85, Collegio Carlo Alberto.
- Michael D. Whinston, 2008. "Lectures on Antitrust Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262731878.
- Amrstong, Mark & Cowan, Simon & Vickers, John, 1995. "Nonlinear pricing and price cap regulation," Journal of Public Economics, Elsevier, vol. 58(1), pages 33-55, September.
- David Martimort & Lars Stole, 2002.
"The Revelation and Delegation Principles in Common Agency Games,"
Econometric Society, vol. 70(4), pages 1659-1673, July.
- David Martimort & Lars Stole, 2001. "The Revelation and Delegation Principles in Common Agency Games," CESifo Working Paper Series 575, CESifo Group Munich.
- Armstrong, Mark, 2006. "Price discrimination," MPRA Paper 4693, University Library of Munich, Germany.
- Philippe Choné & Laurent Linnemer, 2011. "Leaving the Door Ajar : Nonlinear Pricing by a Dominant Firm," Working Papers 2011-16, Center for Research in Economics and Statistics.
- repec:adr:anecst:y:1994:i:34:p:04 is not listed on IDEAS
- David Martimort & Lars Stole, 2009. "Market participation in delegated and intrinsic common-agency games," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 78-102.
When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:7613. 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: ()
If references are entirely missing, you can add them using this form.