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- Title
Nonlinear pricing and exclusion: I. buyer opportunism.
- Authors
Choné, Philippe; Linnemer, Laurent
- Abstract
We study the exclusionary properties of nonlinear price-quantity schedules in an Aghion-Bolton style model with elastic demand and product differentiation. We distinguish three regimes, depending on whether and how the price charged by the dominant firm depends on the quantity purchased from the rival firm. We find that the supply of rival good is distorted downward. Moreover, given the quantity supplied from the rival, the buyer may opportunistically purchase inefficiently many units from the dominant firm to pocket quantity rebates. We show that the possibility for the buyer to dispose of unconsumed units attenuates the opportunism problem and limits the exclusionary effects of nonlinear pricing.
- Subjects
NONLINEAR pricing; CONSUMER behavior; ECONOMIC models; ECONOMIC demand; PRODUCT differentiation
- Publication
RAND Journal of Economics (Wiley-Blackwell), 2015, Vol 46, Issue 2, p217
- ISSN
0741-6261
- Publication type
Article
- DOI
10.1111/1756-2171.12084