When Prohibiting Wholesale Price-Parity Agreements Harms Consumers

28 Pages Posted: 16 Nov 2020

See all articles by Michele Bisceglia

Michele Bisceglia

University of Bergamo - Department of Management, Economics and Quantitative Methods; University of Toulouse 1 - Toulouse School of Economics (TSE)

Jorge Padilla

Compass Lexecon

Salvatore Piccolo

University of Bergamo, Compass Lexecon and CSEF

Date Written: September 28, 2020

Abstract

We study the competitive and welfare effects of wholesale price-parity agreements. These contracts prevent a monopolist, who sells its product to final consumers both directly and indirectly through alternative distribution channels, to charge different input (wholesale) prices to competing intermediaries (e.g., platforms). In a multi-channel and multi-layered industry, organized as an agency business model, we find that the monopolist and the intermediaries do not necessarily have aligned incentives concerning the introduction of wholesale price-parity. While these agreements always hurt the monopolist, they may benefit the intermediaries when competition between the direct and the indirect distribution channels is sufficiently intense. Moreover, when this is the case, in contrast to retail price-parity agreements that typically reduce consumer welfare, wholesale price-parity benefits consumers.

Keywords: Antitrust, Consumer Welfare, Wholesale Price-Parity Agreements, Agency Business Model

JEL Classification: L42, L50, L81

Suggested Citation

Bisceglia, Michele and Bisceglia, Michele and Padilla, Jorge and Piccolo, Salvatore, When Prohibiting Wholesale Price-Parity Agreements Harms Consumers (September 28, 2020). Available at SSRN: https://ssrn.com/abstract=3701149 or http://dx.doi.org/10.2139/ssrn.3701149

Michele Bisceglia

University of Bergamo - Department of Management, Economics and Quantitative Methods ( email )

Salvecchio 19
Bergamo, 24129
Italy

University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )

Place Anatole-France
Toulouse Cedex, F-31042
France

Jorge Padilla

Compass Lexecon ( email )

Paseo de la Castellana 7
Madrid, 28046
Spain

Salvatore Piccolo (Contact Author)

University of Bergamo, Compass Lexecon and CSEF ( email )

via de caniana 2
24127
Bergamo, BG 24127
Italy

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