1. Price Discrimination in Input Markets: Quantity Discounts and Private Information
- Author
-
Daniel Müller and Fabian Herweg
- Subjects
Preisdifferenzierung ,Marktstruktur ,Economics and Econometrics ,asymmetric information, input markets, quantity discounts, price discrimination, screening, vertical contracting ,Vertical Contracting ,L42 ,Tariff ,Markteintritt ,Price discrimination ,jel:D43 ,Quantity Discounts ,Microeconomics ,Asymmetric Information ,InputMarkets ,Price Discrimination ,Screening ,Monopolistic competition ,jel:L42 ,Information asymmetry ,Downstream (manufacturing) ,ddc:330 ,Economics ,Private information retrieval ,Wholesale price index ,Ex-ante ,input markets ,L11 ,Wohlfahrtsanalyse ,Asymmetric Information, InputMarkets, Quantity Discounts, Price Discrimination, Screening, Vertical Contracting ,Vorleistungen ,jel:L11 ,Lieferantenmanagement ,D43 ,Theorie - Abstract
We consider a monopolistic supplier’s optimal choice of wholesale tariffs when downstream firms are privately informed about their retail costs. Under discriminatorypricing, downstream firms that differ in their ex ante distribution of retail costs are offered different tariffs. Under uniform pricing, the same wholesale tariff is offered to all downstream firms. In contrast to the extant literature on thirddegree price discrimination with nonlinear wholesale tariffs, we find that banning discriminatory wholesale contracts—the usual legal practice in the EU and US— often is beneficial for social welfare. This result is shown to be robust even when the upstream supplier faces competition in the form of fringe supply.
- Published
- 2013