Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/94101
Authors: 
Salim, Claudia
Year of Publication: 
2009
Series/Report no.: 
SFB/TR 15 Discussion Paper 258
Abstract: 
This paper examines how the option of a regulated linear input price affects vertical contracting, where a monopolistic upstream supplier sequentially offers supply contracts to two symmetric downstream firms. We find that equilibrium contracts vary with production cost and regulated price level: If the regulated price is not too high, the option allows for price discrimination, but prevents foreclosure in the intermediary market. Indeed, if both cost and optional price are rather low, non-discriminatory input prices below cost may arise. Optional input prices are socially more desirable than a flat ban on price discrimination, as consumers benefit from more intense downstream competition.
Subjects: 
price discrimination
vertical contracting
exclusion
regulatory outside option
JEL: 
D42
L11
L42
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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