Abstract

http://ssrn.com/abstract=2100708
 
 

References (25)



 
 

Footnotes (26)



 


 



Price Discrimination in Input Markets: Downstream Entry and Efficiency


Fabian Herweg


University of Bayreuth - Department of Law and Economics

Daniel Müller


University of Bonn

Fall 2012

Journal of Economics & Management Strategy, Vol. 21, Issue 3, pp. 773-799, 2012

Abstract:     
The extant theory on price discrimination in input markets takes the structure of the downstream industry as exogenously given. This paper endogenizes the structure of the downstream industry and examines the effects of permitting third‐degree price discrimination on market structure and welfare. We identify situations where permitting price discrimination leads to either higher or lower wholesale prices for all downstream firms. These findings are driven by upstream profits being discontinuous due to costly entry. Moreover, permitting price discrimination fosters entry which often improves welfare. Nevertheless, entry can also reduce welfare because it may lead to a severe inefficiency in production.

Number of Pages in PDF File: 27

Accepted Paper Series


Date posted: July 5, 2012  

Suggested Citation

Herweg, Fabian and Müller, Daniel, Price Discrimination in Input Markets: Downstream Entry and Efficiency (Fall 2012). Journal of Economics & Management Strategy, Vol. 21, Issue 3, pp. 773-799, 2012. Available at SSRN: http://ssrn.com/abstract=2100708 or http://dx.doi.org/10.1111/j.1530-9134.2012.00344.x

Contact Information

Fabian Herweg (Contact Author)
University of Bayreuth - Department of Law and Economics ( email )
Universitätsstraße 30
Bayreuth, 95447
Germany
Daniel Müller
University of Bonn ( email )
Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany
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References:  25
Footnotes:  26

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