Input price discrimination in the presence of downstream vertical differentiation

• Type: Article in International Scientific Journal
• Date: 2019

Authors

Brito, D (Author) Other; Tselekounis, M (Author) Other; Helder Vasconcelos (Author) FEP

Journal

Title: Economics Letters

Vol. 184

ISSN: 0165-1765

Publisher: Elsevier

Indexing

ISI Web of Knowledge - 8 Citations

Scopus - 8 Citations

Other information

Authenticus ID: P-00Q-ZMJ

DOI: 10.1016/j.econlet.2019.108622

Abstract (EN): This paper investigates the competitive effects of input price discrimination (IPD) in a setting in which an upstream monopolist produces an essential input supplied to the downstream market where there is competition between two vertically differentiated retailers. Two different input pricing regimes are investigated: (i) the uniform pricing regime, in which third-degree input price discrimination is prohibited; and (ii) a discriminatory pricing regime, under which the upstream monopolist may charge different prices to the two downstream firms. We find that despite favoring the low-quality firm, IPD is welfare enhancing if and only if the quality gap is sufficiently high.

Language: English

Type (Professor's evaluation): Scientific

No. of pages: 6