November 4, 2013, 14:00–15:30
Room MS 001
Industrial Organization seminar
Abstract
We offer an exclusionary scenario for quantity rebates and marketshare discounts offered by dominant firms, based on the upcoming introduction of a rival good in the market. We explain how the shape of the rebates depends on the incumbents’ beliefs about the characteristics of the rival good. When buyers can dispose of unconsumed units at little cost, they might opportunistically purchase unneeded units with the sole purpose of pocketing rebates. We find that such opportunism is never seen in equilibrium and explain how the magnitude of disposal costs affects the shape of optimal price-quantity schedules. JEL codes: L12, L42, D82, D86
Keywords
Inefficient exclusion; buyer opportunism; disposal costs; quantity rebates; incomplete information;