Nonlinear Pricing and Exclusion: I. Buyer Opportunism

33 Pages Posted: 23 Jul 2014

See all articles by Philippe Choné

Philippe Choné

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); CESifo (Center for Economic Studies and Ifo Institute)

Laurent Linnemer

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Date Written: July 22, 2014

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 of the incumbent good is linked to the quantity purchased from the rival firm. We find that the supply of rival good is distorted downwards. Moreover, given the quantity supplied from the rival, the buyer may opportunistically purchase inefficiently many units from the incumbent 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.

Keywords: inefficient exclusion, buyer opportunism, disposal costs, quantity rebates, incomplete information

JEL Classification: L12, L42, D82, D86

Suggested Citation

Choné, Philippe and Linnemer, Laurent, Nonlinear Pricing and Exclusion: I. Buyer Opportunism (July 22, 2014). CESifo Working Paper Series No. 4873, Available at SSRN: https://ssrn.com/abstract=2469740 or http://dx.doi.org/10.2139/ssrn.2469740

Philippe Choné

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Laurent Linnemer (Contact Author)

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

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