Document de travail
Competitive Cross-Subsidization
Zhijun Chen et Patrick Rey
IDEI Working Paper
14 décembre 2013
Référence
Zhijun Chen et Patrick Rey, « Competitive Cross-Subsidization », IDEI Working Paper, 14 décembre 2013.
Résumé
This paper analyzes competitive pricing policies by multiproduct firms facing heterogeneous buying patterns. We show that cross-subsidization arises when firms have comparative advantages on different products but are equally efficient overall: Firms earn a profit from multi-stop shoppers by charging positive margins on their strong products but, as price competition for one-stop shoppers drives total margins down to zero, they price weaker products below cost. Banning below-cost pricing leads to higher profits and higher prices for one-stop shoppers, and may reduce consumer surplus as well as total social welfare.
Mots-clés
Bertrand competition; cross-subsidization; buying patterns; one-stop and multi-stop shopping;
Codes JEL
- L11: Production, Pricing, and Market Structure • Size Distribution of Firms
- L41: Monopolization • Horizontal Anticompetitive Practices
Partenaire de recherche
Orange