Switching Costs in Retroactive Rebates - What's Time Got to Do with it?

6 Pages Posted: 14 Feb 2005 Last revised: 9 May 2011

See all articles by Frank P. Maier-Rigaud

Frank P. Maier-Rigaud

ABC economics; IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods

Date Written: February 1, 2005

Abstract

This paper analyzes the role of the reference period in assessing switching costs in retroactive rebates. A retroactive rebate allows a firm to use the inelastic portion of demand as leverage to decrease price in the elastic portion of demand, thereby artificially increasing switching costs of buyers. I identify two factors that determine the extent to which retroactive rebates, as a form of infra-personal price-discrimination, can result in potential market foreclosure. These two factors are the rebate percentage and the threshold at which this percentage is retroactively applied. In contrast to the existing literature, the length of the reference period within which a rebate scheme applies is demonstrated to be at best an indirect approximation of the potential foreclosure effects of a rebate.

Keywords: Retroactive rebates, article 82 ECT, article 102 TFEU, reference period, infrapersonal price discrimination, foreclosure

JEL Classification: L42, K21, D43

Suggested Citation

Maier-Rigaud, Frank P., Switching Costs in Retroactive Rebates - What's Time Got to Do with it? (February 1, 2005). European Competition Law Review (ECLR), Vol.26, No. 5, pp. 272-276, 2005, Available at SSRN: https://ssrn.com/abstract=666722 or http://dx.doi.org/10.2139/ssrn.666722

Frank P. Maier-Rigaud (Contact Author)

ABC economics ( email )

Berlin, 10115
Germany
10115 (Fax)

HOME PAGE: http://www.ABCecon.com

IESEG School of Management (LEM-CNRS), Department of Economics and Quantitative Methods ( email )

Socle de la Grande Arche
1 Parvis de la Défense
Paris, La Défense Cedex, 92044
France

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
277
Abstract Views
1,850
rank
128,920
PlumX Metrics