Price Discrimination and Sequential Contracting in Monopolistic Input Markets

6 Pages Posted: 30 Nov 2013 Last revised: 30 Jul 2015

See all articles by Hyunchul Kim

Hyunchul Kim

Sungkyunkwan University

Seung-Gyu Sim

Aoyama Gakuin University

Date Written: October 9, 2014

Abstract

This paper examines the welfare implication of banning price discrimination in the intermediate goods market in which a monopolistic supplier contracts with asymmetric downstream retailers. We demonstrate that the supplier has a strong incentive to manipulate interdependent demand structure through sequential contracting whether price discrimination is banned or not, and allowing price discrimination improves social welfare and consumer surplus when sequential contracting is implemented by the supplier.

Keywords: Monopolistic Input Market, Price Discrimination, Sequential Contracting

JEL Classification: D43, L14, L42

Suggested Citation

Kim, Hyunchul and Sim, Seung-Gyu, Price Discrimination and Sequential Contracting in Monopolistic Input Markets (October 9, 2014). Available at SSRN: https://ssrn.com/abstract=2361092 or http://dx.doi.org/10.2139/ssrn.2361092

Hyunchul Kim

Sungkyunkwan University ( email )

25-2 Sungkyunkwan-ro
Jongno-gu
Seoul, 03063
Korea, Republic of (South Korea)

Seung-Gyu Sim (Contact Author)

Aoyama Gakuin University ( email )

4-4-25 Shibuya, Shibuya-ku
Tokyo, 150-8366
Japan

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