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Input Price Discrimination in Endogenous Competition Mode

Author

Listed:
  • Kangsik Choi

    (Pusan National University)

  • Seonyoung Lim

    (Mokpo National University)

Abstract

We analyze the endogenous choice of competition mode when asymmetric retailers engage in price discrimination and uniform pricing with upstream monopoly via a linear wholesale contract. In contrast to previous results, if the cost difference is sufficiently large between asymmetric retailers, choosing a price contract for the efficient retailer and choosing a quantity contract for the inefficient retailer are implemented under both price discrimination and uniform pricing rules, while Cournot competition is sustained if the cost difference is sufficiently small. Although similar endogenous choice of (a)symmetric competition in equilibrium can be achieved in both pricing rules, social welfare, producer and consumer surpluses are higher under price discrimination than under uniform pricing unless the cost difference is small.

Suggested Citation

  • Kangsik Choi & Seonyoung Lim, 2023. "Input Price Discrimination in Endogenous Competition Mode," The Japanese Economic Review, Springer, vol. 74(2), pages 301-330, April.
    • Handle: RePEc:spr:jecrev:v:74:y:2023:i:2:d:10.1007_s42973-021-00107-6
    DOI: 10.1007/s42973-021-00107-6
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    More about this item

    Keywords

    Endogenous choice; Asymmetric cost; Uniform pricing; Price discrimination;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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