Cross-subsidization arises naturally when rms with di¤erent comparative ad- vantages compete for consumers with diverse shopping patterns. Firms then face a form of co-opetition, being substitutes for one-stop shoppers and complements for multi-stop shoppers. Competition for one-stop shoppers then drives total prices down to cost, but rms subsidize weak products with the pro t made on strong products. While rms and consumers would bene t from cooperation limiting cross- subsidization (e.g., through price caps), banning below-cost pricing instead increases rmspro ts at the expense of one-stop shoppers; this calls for a cautious use of below-cost pricing regulations in competitive markets.
|Date of creation:||14 Dec 2013|
|Date of revision:||Dec 2016|
|Contact details of provider:|| Phone: (+33) 5 61 12 86 23|
Web page: http://www.tse-fr.eu/
More information through EDIRC
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.:
- Berg, Sanford V. & Weisman, Dennis L., 1992. "A guide to cross- subsidization and price predation : Ten myths," Telecommunications Policy, Elsevier, vol. 16(6), pages 447-459, August.
- Rey, Patrick & Tirole, Jean, 2013.
"Cooperation vs. Collusion: How Essentiality Shapes Co-opetition,"
IDEI Working Papers
801, Institut d'Économie Industrielle (IDEI), Toulouse.
- Rey, Patrick & Tirole, Jean, 2013. "Cooperation vs. Collusion: How Essentiality Shapes Co-opetition," TSE Working Papers 13-439, Toulouse School of Economics (TSE).
- 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.
- Faulhaber, Gerald R, 1975. "Cross-Subsidization: Pricing in Public Enterprises," American Economic Review, American Economic Association, vol. 65(5), pages 966-977, December.
- Paul Klemperer & A. Jorge Padilla, 1997. "Do Firms' Product Lines Include Too Many Varieties?," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 472-488, Autumn.
- Mark Armstrong & John Vickers, 2010. "Competitive Non-linear Pricing and Bundling," Review of Economic Studies, Oxford University Press, vol. 77(1), pages 30-60.
- John Vickers & Mark Armstrong, 2006. "Competitive Nonlinear Pricing and Bundling," Economics Series Working Papers 281, University of Oxford, Department of Economics.
- Armstrong, Mark & Vickers, John, 2006. "Competitive nonlinear pricing and bundling," MPRA Paper 70, University Library of Munich, Germany.
- Paul R. Messinger & Chakravarthi Narasimhan, 1997. "A Model of Retail Formats Based on Consumers' Economizing on Shopping Time," Marketing Science, INFORMS, vol. 16(1), pages 1-23.
- Klemperer, Paul, 1992. "Equilibrium Product Lines: Competing Head-to-Head May Be Less Competitive," American Economic Review, American Economic Association, vol. 82(4), pages 740-755, September.
- Weinstein, Jonathan & Ambrus, Attila, 2008. "Price dispersion and loss leaders," Theoretical Economics, Econometric Society, vol. 3(4), December.
- Weinstein, Jonathan & Ambrus, Attila, 2008. "Price Dispersion and Loss Leaders," Scholarly Articles 4589708, Harvard University Department of Economics.
- Gijsbrechts, E. & Campo, K. & Nisol, P., 2005. "Beyond Promotion-Based Store Switching : Antecedents and Consequences of Systematic Multiple-Store Shopping," Discussion Paper 2005-76, Tilburg University, Center for Economic Research.
- Baye, Michael R. & Kovenock, Dan & de Vries, Casper G., 1992. "It takes two to tango: Equilibria in a model of sales," Games and Economic Behavior, Elsevier, vol. 4(4), pages 493-510, October.
- Lal, Rajiv & Matutes, Carmen, 1994. "Retail Pricing and Advertising Strategies," The Journal of Business, University of Chicago Press, vol. 67(3), pages 345-370, July.
- DeGraba, Patrick, 2006. "The loss leader is a turkey: Targeted discounts from multi-product competitors," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 613-628, May.
- repec:hrv:faseco:4685158 is not listed on IDEAS
- Rao, P. M. & Klein, Joseph A., 1992. "Antitrust issues concerning R&D cross-subsidization : A case study of US telecommunications," Telecommunications Policy, Elsevier, vol. 16(5), pages 415-424, July. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:tse:wpaper:27777. 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 you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.