Input Price Discrimination by Resale Market

50 Pages Posted: 25 Jun 2018 Last revised: 6 Feb 2019

See all articles by Jeanine Miklós-Thal

Jeanine Miklós-Thal

University of Rochester - Simon Business School

Greg Shaffer

University of Rochester - Simon Business School

Date Written: December 20, 2018

Abstract

This paper analyzes supply tariffs that discriminate between resale in different markets. In a setting with competing retailers that operate in multiple (independent or interdependent) markets, we show that, all else equal, the supplier wants to discriminate against resale in the market with the higher aggregate cross-seller diversion ratio. We find that discrimination can improve allocative efficiency and present sufficient conditions, involving the pass-through rates and the inverse market demand curvatures in the different markets, under which discrimination has positive effects on output and welfare. Our insights are relevant for the policy treatment of vertical restraints on online sales.

Keywords: price discrimination, vertical restraints, conduct parameters, pass-through rates, multi-product oligopoly

JEL Classification: D42, D43, L11, L12, L13, L42

Suggested Citation

Miklós-Thal, Jeanine and Shaffer, Greg, Input Price Discrimination by Resale Market (December 20, 2018). Available at SSRN: https://ssrn.com/abstract=3191951 or http://dx.doi.org/10.2139/ssrn.3191951

Jeanine Miklós-Thal (Contact Author)

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

Greg Shaffer

University of Rochester - Simon Business School ( email )

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