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Input price discrimination by resale market

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  • Jeanine Miklós‐Thal
  • Greg Shaffer

Abstract

This article 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, a monopolist 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 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.

Suggested Citation

  • Jeanine Miklós‐Thal & Greg Shaffer, 2021. "Input price discrimination by resale market," RAND Journal of Economics, RAND Corporation, vol. 52(4), pages 727-757, December.
    • Handle: RePEc:bla:randje:v:52:y:2021:i:4:p:727-757
    DOI: 10.1111/1756-2171.12389
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    References listed on IDEAS

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    Cited by:

    1. Li, Youping & Zhang, Jianhu, 2024. "The welfare effects of input price discrimination revisited," International Journal of Industrial Organization, Elsevier, vol. 95(C).
    2. Dirk Bergemann & Alessandro Bonatti, 2024. "Data, Competition, and Digital Platforms," American Economic Review, American Economic Association, vol. 114(8), pages 2553-2595, August.
    3. Aguirre, Iñaki & Yenipazarli, Arda, 2022. "A Rationale for the “Meeting Competition Defense” when Competitive Pressure Varies Across Markets," MPRA Paper 113746, University Library of Munich, Germany.
    4. Germain Gaudin & Romain Lestage, 2022. "Input Price Discrimination, Demand Forms, And Welfare," Journal of Industrial Economics, Wiley Blackwell, vol. 70(4), pages 1033-1057, December.
    5. Adachi, Takanori, 2023. "A sufficient statistics approach for welfare analysis of oligopolistic third‐degree price discrimination," International Journal of Industrial Organization, Elsevier, vol. 86(C).
    6. Tsuritani, Ryosuke, 2023. "Strategic Input Price Discrimination with Horizontal Shareholding," MPRA Paper 121176, University Library of Munich, Germany.
    7. Nicolas Pasquier, 2024. "Decentralization and Consumer Welfare with Substitutes or Complements," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(3), pages 449-469, May.
    8. Honggang Hu & Quan Zheng & Xiajun Amy Pan, 2022. "Agency or Wholesale? The Role of Retail Pass-Through," Management Science, INFORMS, vol. 68(10), pages 7538-7554, October.

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