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Loss-leaders Banning Laws as Vertical Restraints

  • Marie-Laure Allain

    (Crest)

  • Claire Chambolle

    (Crest)

This paper explores the indirect in‡ationary mechanism allowed byloss leaders banning laws. In a model where a monopolist producer sells his productthrough vertically separated and di¤erentiated retailers, we show that the ban of resaleat a loss can be used strategically by the producer to increase his wholesale price andpay the retailers through negotiated listing fees, thus raising his pro…t. The ban turnswholesale prices into ‡oor prices, thus increasing resale price and lessening consumers’welfare. These results are robust if the listing fees are two-part tari¤.

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Paper provided by Centre de Recherche en Economie et Statistique in its series Working Papers with number 2004-19.

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Date of creation: 2004
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Handle: RePEc:crs:wpaper:2004-19
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  1. Lal, Rajiv & Matutes, Carmen, 1994. "Retail Pricing and Advertising Strategies," The Journal of Business, University of Chicago Press, vol. 67(3), pages 345-70, July.
  2. Horn, H. & Wolinsky, A., 1988. "Bilateral Monopolies And Incentives For Merger," Papers 410, Stockholm - International Economic Studies.
  3. Bergès-Sennou Fabian & Bontems Philippe & Réquillart Vincent, 2004. "Economics of Private Labels: A Survey of Literature," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 2(1), pages 1-25, February.
  4. Paul Milgrom & John Roberts, 1998. "Limit Pricing and Entry Under Incomplete Information: An Equilibrium Analysis," Levine's Working Paper Archive 245, David K. Levine.
  5. McAfee, R Preston & Schwartz, Marius, 1994. "Opportunism in Multilateral Vertical Contracting: Nondiscrimination, Exclusivity, and Uniformity," American Economic Review, American Economic Association, vol. 84(1), pages 210-30, March.
  6. Rey, Patrick & Stiglitz, Joseph, 1988. "Vertical restraints and producers' competition," European Economic Review, Elsevier, vol. 32(2-3), pages 561-568, March.
  7. Claire Chambolle, 2000. "Stratégies de revente à perte et réglementation," Working Papers 2000-52, Centre de Recherche en Economie et Statistique.
  8. Greg Shaffer, 1991. "Slotting Allowances and Resale Price Maintenance: A Comparison of Facilitating Practices," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 120-135, Spring.
  9. Bliss, Christopher, 1988. "A Theory of Retail Pricing," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 375-91, June.
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