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The welfare effects of third-degree price discrimination in intermediate good markets: the case of bargaining

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  • Daniel P. O'Brien

Abstract

type="main"> This article examines the welfare effects of third-degree price discrimination by a monopolist selling to downstream firms with bargaining power. One of the downstream firms (the “chain store”) can integrate backward at lower cost than rivals. Bargaining powers also depend on disagreement profits, bargaining weights, and concession costs. If the chain's integration threat is not credible, price discrimination reduces the input price charged symmetric downstream firms and often reduces the average input price charged asymmetric downstream firms.

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  • Daniel P. O'Brien, 2014. "The welfare effects of third-degree price discrimination in intermediate good markets: the case of bargaining," RAND Journal of Economics, RAND Corporation, vol. 45(1), pages 92-115, March.
    • Handle: RePEc:bla:randje:v:45:y:2014:i:1:p:92-115
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    File URL: http://hdl.handle.net/10.1111/1756-2171.12043
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    1. Francisco Galera & Pedro Mendi & Juan Carlos Molero, 2017. "Quality Differences, Third-Degree Price Discrimination, And Welfare," Economic Inquiry, Western Economic Association International, vol. 55(1), pages 339-351, January.
    2. Tang, Yao & Chen, Rachel R. & Guan, Xu, 2021. "Daily-deal market with consumer retention: Price discrimination or quality differentiation," Omega, Elsevier, vol. 102(C).
    3. Li, Youping & Zhang, Jianhu, 2024. "The welfare effects of input price discrimination revisited," International Journal of Industrial Organization, Elsevier, vol. 95(C).

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