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Competitive quantity discounts

  • Calzolari, Giacomo
  • Denicolò, Vincenzo

We analyze the effects of competition with quantity discounts in a duopoly model with asymmetric firms. Consumers are privately informed about demand, so firms use quantity discounts as a price discrimination device. However, a dominant firm may also use quantity discounts to weaken or eliminate its competitor. We analyze the effects of quantity discounts on firms' profits and consumer surplus. Our main finding is that quantity discounts can decrease social welfare (i.e., the sum of producers' and consumers' surplus) for a small set of parameter values.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8144.

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Date of creation: Dec 2010
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Handle: RePEc:cpr:ceprdp:8144
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  1. Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
  2. Dennis W. Carlton & Patrick Greenlee & Michael Waldman, 2008. "Assessing the Anticompetitive Effects of Multiproduct Pricing," NBER Working Papers 14199, National Bureau of Economic Research, Inc.
  3. Dennis W. Carlton & Michael Waldman, 2008. "Safe Harbors for Quantity Discounts and Bundling," EAG Discussions Papers 200801, Department of Justice, Antitrust Division.
  4. Armstrong, Mark, 2006. "Price discrimination," MPRA Paper 4693, University Library of Munich, Germany.
  5. 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.
  6. repec:cpi:cpijrn:1.2.2005:i=4880 is not listed on IDEAS
  7. Calzolari, Giacomo & Denicolò, Vincenzo, 2009. "Competition with exclusive contracts and market-share discounts," CEPR Discussion Papers 7613, C.E.P.R. Discussion Papers.
  8. repec:bla:restud:v:77:y:2010:i:1:p:30-60 is not listed on IDEAS
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