Empirical evidence on the role of non linear wholesale pricing and vertical restraints on cost pass-through PDF Download
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Author: Céline Bonnet
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Author: Céline Bonnet
Publisher:
ISBN:
Category :
Languages : en
Pages : 40
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Author: Garrett Patrick Hagemann
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ISBN:
Category :
Languages : en
Pages : 222
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This dissertation addresses several open issues in the economics surrounding the use of nonlinear pricing. The first chapter empirically examines the impact of the use of nonlinear pricing by wholesalers. The second chapter evaluates how firm profit depends on the number of prices offered in a nonlinear price schedule. Finally, the third chapter investigates the use of all-unit discounts as a price discrimination instrument. The first chapter exploits a unique data set of price schedules to provide the first empirical estimate of the welfare impact of second degree price discrimination in a market with double marginalization. Theoretical predictions in such a context are ambiguous. Quantity discounts at the wholesale level reduce costs for larger retailers, increasing efficiency. However, quantity discounts raise input costs for smaller retailers, increasing prices consumers may pay. The combined welfare effects on consumers umers depends on how much of input cost discounts are passed through to consumers and the distribution of retailer size. I develop and estimate a model of the New York State retail liquor market where wholesalers offer a multi-part nonlinear tariff for each product. The structural model is then used to estimate the welfare impact of restricting wholesale pricing to be linear. I find that banning quantity discounts reduces total welfare by approximately 14% on average. Consumer surplus and wholesaler profit decline by approximately 26% on average. Average retailer profit increases by a similar magnitude, though effects for a particular retailer are heterogeneous across retailer size. The second chapter examines the shape of observed price schedules more directly. Sellers often offer price schedules with relatively few segments rather than completely nonlinear price schedules which offer a unique price for each unit sold. By not offering a completely nonlinear, sellers are foregoing some additional profit in favor of a simpler pricing strategy. I find that the scale of these foregone profits is relatively small and only loosely related to product characteristics. When considered in percentage terms, foregone profits are very similar across a large number of products. This suggests that simple pricing strategies obtain almost all the profits available and this is a common property of nonlinear pricing strategies. The final chapter compares price discrimination through two different quantity discount mechanisms: all-unit discounts and incremental discounts. All-unit-discounts give consumers a lower marginal price on all units purchased once total purchase size crosses a threshold. Incremental discounts only provide discounts on units above the threshold. Relative to incremental discounts, all-unit-discounts imply higher marginal prices and bunching of purchase sizes in equilibrium. The equilibrium bunching may present a challenge for estimating the model empirically.
Author: Kai-Uwe Kühn
Publisher:
ISBN:
Category :
Languages : en
Pages : 56
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Author: Kai-Uwe Kühn
Publisher:
ISBN:
Category : Commerce
Languages : en
Pages : 56
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![Vertical Restraints in a Manufacturere [sic] Duopoly PDF](https://books.google.com/books/content/images/frontcover/AG3fMgEACAAJ?fife=w80-h100)
Author: Kai-Uwe Kühn
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ISBN:
Category : Duopolies
Languages : en
Pages : 56
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Author: Oana Secrieru
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ISBN:
Category :
Languages : en
Pages : 26
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Author: Volkan Cetinkaya
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ISBN:
Category : Competition
Languages : en
Pages : 100
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This dissertation contains three essays which examine vertical integration and vertical restraints. The first essay examines a vertical restraint, Minimum Advertised Price (MAP) which is often observed in vertical relations as a remedy for the horizontal externality in provision of service. Retailers provide a variety of services that affect the sale of their products such as demonstrations and the provision of information and advice. These retail services can generate horizontal externalities among retailers. In such a case, the individual retailer realizes less than the full effect on aggregate profits of his additional retail services and therefore provides less than the optimal level of service. This study shows that MAP can ensure optimal level of service and it duplicates the welfare outcome of vertical integration regardless of the level of service externality. The second essay explores the private and social desirability of vertical restraints imposed by a manufacturer on its retailers when there is uncertainty in demand or cost. A monopoly manufacturer offers a contract to retailers in an environment where the retailers compete in quantities and possess superior information about local demand conditions or their costs of distribution. Two vertical restraints are studied: Resale Price Maintenance and Exclusive Territories. In particular, this study shows that resale price maintenance and exclusive territories are not substitutes. If the retailers are infinitely risk averse, the manufacturer prefers resale price maintenance under demand uncertainty, and quantity competition under cost uncertainty. However, if the retailers are risk neutral, the manufacturer prefers resale price maintenance regardless of the type of uncertainty. The last essay examines affiliations that integrate physicians and hospitals. Managed care organizations shifted financial risks to health care providers by changing the payment method from fee-for-service to capitation. Due to this emerging financial risk, one of the strategies that physicians adopted was establishing affiliations with hospitals. This study performs an empirical analysis of the effect of the affiliation types on three important dimensions of health care: quality, cost, and price. The empirical results show that when the affiliation between a hospital and physicians is strong, the integrated organization operates more efficiently than independent hospitals. However, affiliations that weakly integrate hospitals and physicians produce a lower quality of health care with higher cost and price.
Author: Ronald N. Lafferty
Publisher:
ISBN:
Category : Price maintenance
Languages : en
Pages : 492
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Author: Robert Bork
Publisher:
ISBN: 9781736089712
Category :
Languages : en
Pages : 536
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The most important book on antitrust ever written. It shows how antitrust suits adversely affect the consumer by encouraging a costly form of protection for inefficient and uncompetitive small businesses.
Author: Sourav Ray
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Asymmetric pricing is the phenomenon where prices rise more readily than they fall. We articulate, and provide empirical support for, a theory of asymmetric pricing in wholesale prices. In particular, we show how wholesale prices may be asymmetric in the small but symmetric in the large, when retailers face costs of price adjustments. Such retailers will not adjust prices for small changes in their costs. Upstream manufacturers then see a region of inelastic demand where small wholesale price changes do not translate into commensurate retail price changes. The implication is asymmetric - small wholesale increases are more profitable because manufacturers will not lose customers from higher retail prices; yet, small wholesale decreases are less profitable, because these will not create lower retail prices, hence no extra revenue from greater sales. For larger changes, this asymmetry at wholesale vanishes as the costs of changing prices are compensated by increases in retailers' revenue that result from correspondingly large retail price changes. We first present a formal economic model of a channel with forward looking retailers facing costs of price adjustment to derive the testable propositions. Next, we test these on manufacturer prices in a supermarket scanner dataset to find support for our theory. We discuss the contributions of the results for the asymmetric pricing, distribution channels and cost of price adjustment literatures, and implications for public policy.
