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| Title: | | Loyalty-Rewarding Pricing Schemes: Contract Space and Rent Shifting |
| Authors: | | Wohlschlegel, Ansgar |
| Issue Date: | | 2010 |
| Series/Report no.: | | Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Regulation and Pricing Policies F8-V1 |
| Abstract: | | Wholesale contracts with loyalty-rewarding pricing schemes are of particular concern in legal cases of abuse of market power. Competition authorities complain that an incumbent manufacturer may use the lock-in effect of such long-term contracts with a retailer to impede subsequent entry or even prevent it. This paper analyzes an incumbent manufacturer using a long-term contract to shift rent from an entrant who can produce only in later periods. If contracts can only be made contingent on total own quantities, the incumbent's pre-entry (post-entry) quantity will be excessive (inefficiently small) even under the otherwise most general set of contracts. The model permits the analysis of simple pricing schemes widely used in practice. In particular, I show that all-unit discounts outperform incremental discounts both from the incumbent's and a social point of view, although competition authorities tend to take a more skeptical view towards the former. |
| Subjects: | | Abuse of Market Dominance Discounts Exclusive Dealing |
| JEL: | | D80 K21 L42 |
| Document Type: | | Conference Paper |
| Appears in Collections: | | Jahrestagung des Vereins für Socialpolitik 2010 (Kiel): Ökonomie der Familie
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| The document was removed on behalf of the author(s)/ the editor(s) on: October 26, 2010 |
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