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Channel Performance and Incentives for Retail Cost Misrepresentation

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  • Rabah Amir
  • Thierry Leiber
  • Isabelle Maret

Abstract

This paper investigates the price decision making and channel performance under cost misrepresentation at the retail stage. In the standard double marginalization game, we introduce a preliminary stage, where the retailer can misrepresent her constant marginal cost. We give respective sufficient conditions on the demand function for the retailer to misrepresent her marginal cost downwards and upwards. In contrast to the literature, we prove that the opportunistic behavior of the retailer does not necessarily lower channel performance and social welfare. Indeed, a downward misrepresentation of the retail cost, which one obtains when the price elasticity of demand is not very price elastic, increases channel performance and social welfare. Illustrative examples using common specifications of demand are provided.

Suggested Citation

  • Rabah Amir & Thierry Leiber & Isabelle Maret, 2006. "Channel Performance and Incentives for Retail Cost Misrepresentation," Working Papers of BETA 2006-20, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    • Handle: RePEc:ulp:sbbeta:2006-20
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    File URL: http://beta.u-strasbg.fr/WP/2006/2006-20.pdf
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    References listed on IDEAS

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    Cited by:

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    2. Gisèle Umbhauer, 2007. "De l’amiante au chrysotile, un glissement stratégique dans la désinformation," Working Papers of BETA 2007-15, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    3. Li Qin & Eleftherios Spyromitros & Moïse Sidiropoulos, 2007. "Monetary Policy with Uncertain Central Bank Preferences for Robustness," Working Papers of BETA 2007-23, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    4. Sofia Pessoa e Costa & Stéphane Robin, 2007. "The Impact Of Training Programmes On Wages In France: An Evaluation Of The “Qualifying Contract” Using Propensity Scores," Working Papers of BETA 2007-18, Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg.
    5. Matt Van Essen, 2013. "Regulating the Anticommons: Insights from Public‐Expenditure Theory," Southern Economic Journal, John Wiley & Sons, vol. 80(2), pages 523-539, October.

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