Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/72559
Authors: 
Herweg, Fabian
Müller, Daniel
Year of Publication: 
2013
Series/Report no.: 
CESifo Working Paper 4202
Abstract: 
We consider a monopolistic supplier’s optimal choice of wholesale tariffs when downstream firms are privately informed about their retail costs. Under discriminatory pricing, 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 price discrimination with nonlinear wholesale tariffs, we find that banning discriminatory wholesale contracts often improves welfare. This also holds if the manufacturer is not an unconstrained monopolist. Moreover, uniform pricing increases downstream investments in cost reduction in the long run.
Subjects: 
asymmetric information
input markets
quantity discounts
price discrimination
screening
vertical contracting
JEL: 
D43
L11
L42
Document Type: 
Working Paper

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