Abstract
Original language | English |
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Pages (from-to) | 152-172 |
Number of pages | 21 |
Journal | International Journal of Industrial Organization |
Volume | 65 |
Early online date | 20 Mar 2019 |
DOIs | |
Publication status | Published - Jul 2019 |
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Keywords
- All-units discounts
- Capacity constraint
- Linear pricing
Cite this
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Asymmetry in capacity and the adoption of all-units discounts. / CHAO, Yong; TAN, Guofu; WONG, Adam Chi Leung.
In: International Journal of Industrial Organization, Vol. 65, 07.2019, p. 152-172.Research output: Journal Publications › Journal Article (refereed)
TY - JOUR
T1 - Asymmetry in capacity and the adoption of all-units discounts
AU - CHAO, Yong
AU - TAN, Guofu
AU - WONG, Adam Chi Leung
PY - 2019/7
Y1 - 2019/7
N2 - In many abuse of dominance antitrust cases, the dominant firm adopts pricing schemes involving all-units discounts, whereas its smaller competitors often use simple linear pricing. We provide a game-theoretic justification for the observed asymmetry in pricing practices by studying a model in which a firm with full capacity faces a capacity-constrained rival. The asymmetry in capacity between the firms, which gives rise to the captive market, allows the dominant firm to take advantage of the quantity commitment through all-units discounts while the capacity-constrained rival is induced to offer simple linear pricing.
AB - In many abuse of dominance antitrust cases, the dominant firm adopts pricing schemes involving all-units discounts, whereas its smaller competitors often use simple linear pricing. We provide a game-theoretic justification for the observed asymmetry in pricing practices by studying a model in which a firm with full capacity faces a capacity-constrained rival. The asymmetry in capacity between the firms, which gives rise to the captive market, allows the dominant firm to take advantage of the quantity commitment through all-units discounts while the capacity-constrained rival is induced to offer simple linear pricing.
KW - All-units discounts
KW - Capacity constraint
KW - Linear pricing
UR - http://www.scopus.com/inward/record.url?scp=85063662295&partnerID=8YFLogxK
U2 - 10.1016/j.ijindorg.2019.03.001
DO - 10.1016/j.ijindorg.2019.03.001
M3 - Journal Article (refereed)
VL - 65
SP - 152
EP - 172
JO - International Journal of Industrial Organization
JF - International Journal of Industrial Organization
SN - 0167-7187
ER -