Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/27312
Authors: 
von Schlippenbach, Vanessa
Year of Publication: 
2008
Series/Report no.: 
DIW Discussion Papers 788
Abstract: 
We analyze below-cost pricing in retail markets and examine its impact on social welfare as well as on suppliers' incentives to invest in quality. Considering negotiations about a linear wholesale price between the retailer and her suppliers, we find that below-cost pricing aggravates the double marginalization problem and causes welfare losses compared to a regime where below-cost pricing is banned. Furthermore, suppliers have stronger incentives to invest in high quality products if a ban of below-cost pricing is enforced.
Subjects: 
Complementarities
Retailing
Below-Cost Pricing
JEL: 
L22
L42
Document Type: 
Working Paper

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