Competitive quantity discounts
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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- Armstrong, Mark, 2006. "Price discrimination," MPRA Paper 4693, University Library of Munich, Germany.
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- 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.
- Armstrong, Mark & Vickers, John, 2001. "Competitive Price Discrimination," RAND Journal of Economics, The RAND Corporation, vol. 32(4), pages 579-605, Winter.
- 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.
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