scholarly journals Price Discrimination in Input Markets: Quantity Discounts and Private Information

2013 ◽  
Vol 124 (577) ◽  
pp. 776-804 ◽  
Author(s):  
Fabian Herweg ◽  
Daniel Müller
Keyword(s):  
Price Discrimination ◽  
Private Information ◽  
Quantity Discounts ◽  
Input Markets

Loyalty Discounts

2013 ◽  
Vol 13 (2) ◽  
pp. 655-685 ◽  
Author(s):  
Uğur Akgün ◽  
Ioana Chioveanu
Keyword(s):  
Private Information ◽  
Risk Attitude ◽  
Differentiated Products ◽  
Quantity Discounts ◽  
Risk Averse ◽  
Product Substitution ◽  
Market Outcomes ◽  
Wide Range ◽  
Parameter Values ◽  
Pricing Schemes

Abstract This article analyses the use of loyalty inducing discounts in vertical supply chains. An upstream supplier and a competitive fringe sell differentiated products to a retailer who has private information about the stochastic demand. We compare the market outcomes, when the supplier uses two-part tariffs (2PT), all-unit quantity discounts (AU), and market-share discounts (MS). We show that the retailer’s risk attitude affects supplier’s preferences over these pricing schemes. When the retailer is risk neutral, it bears all the risk and the three schemes lead to the same outcome. When the retailer is risk averse, a 2PT performs the worst from the supplier’s perspective, but it leads to the highest welfare. For a wide range of parameter values (but not for all), the supplier prefers MS to AU. By limiting the retailer’s product substitution possibilities, MS makes the demand for the manufacturer’s product more inelastic. This reduces the amount (share of total profits) the supplier needs to leave to the retailer for the latter to participate in the scheme.

The Impact of Uniform Pricing Regulations on Incentives to Generate and Disclose Accounting Information

2020 ◽  
Author(s):  
Anil Arya ◽  
Brian Mittendorf ◽  
Dae-Hee Yoon
Keyword(s):  
Price Discrimination ◽  
Accounting Information ◽  
Extensive Study ◽  
Economic Effects ◽  
Information Environment ◽  
Welfare Gains ◽  
Uniform Pricing ◽  
Input Markets ◽  
The Impact

A persistent question in industrial organization is whether regulations restricting price discrimination in input markets can promote efficiency. Despite the extensive study of the economic effects of input pricing regulations, the literature is bereft of an examination of the role of accounting information. In this paper, we seek to fill the gap by modeling the effects of uniform pricing restrictions in input markets on firms’ information generation and disclosure. In doing so, we find that information considerations present an impetus for uniform pricing requirements since they promote incentives for retail firms to both acquire and disclose relevant accounting information. In effect, by shielding retail firms from excessive supplier exploitation, uniform pricing regulations create a richer and more transparent information environment. This, then, leads to welfare gains and even benefits that can accrue naturally to all supply chain partners including the supplier, whose actions are constrained by the uniform pricing regulation. This paper was accepted by Brian Bushee, accounting.

scholarly journals Nonlinear Pricing in Village Economies

Econometrica ◽  
2020 ◽  
Vol 88 (1) ◽  
pp. 207-263 ◽  
Author(s):  
Orazio Attanasio ◽  
Elena Pastorino
Keyword(s):  
Price Discrimination ◽  
Conditional Cash Transfer ◽  
Nonlinear Pricing ◽  
Cash Transfer ◽  
Reduced Form ◽  
Quantity Discounts ◽  
Transfer Program ◽  
Market Participation ◽  
Using Data ◽  
The Impact

This paper examines the prices of basic staples in rural Mexico. We document that nonlinear pricing in the form of quantity discounts is common, that quantity discounts are sizable for basic staples, and that the well‐known conditional cash transfer program Progresa has significantly increased quantity discounts, although the program, as documented in previous studies, has not affected unit prices on average. To account for these patterns, we propose a model of price discrimination that nests those of Maskin and Riley (1984) and Jullien (2000), in which consumers differ in their tastes and, because of subsistence constraints, in their ability to pay for a good. We show that under mild conditions, a model in which consumers face heterogeneous subsistence or budget constraints is equivalent to one in which consumers have access to heterogeneous outside options. We rely on known results to characterize the equilibrium price schedule, which is nonlinear in quantity. We analyze the effect of nonlinear pricing on market participation as well as the impact of a market‐wide transfer, analogous to the Progresa one, when consumers are differentially constrained. We show that the model is structurally identified from data on prices and quantities from a single market under common assumptions. We estimate the model using data on three commonly consumed commodities from municipalities and localities in Mexico. Interestingly, we find that relative to linear pricing, nonlinear pricing is beneficial to a large number of households, including those consuming small quantities, mostly because of the higher degree of market participation that nonlinear pricing induces. We also show that the Progresa transfer has affected the slopes of the price schedules of the three commodities we study, which have become steeper as consistent with our model, leading to an increase in the intensity of price discrimination. Finally, we find that a reduced form of our model, in which the size of quantity discounts depends on the hazard rate of the distribution of quantities purchased in a village, accounts for the shift in price schedules induced by the program.

scholarly journals Price discrimination in input markets

2009 ◽  
Vol 40 (1) ◽  
pp. 1-19 ◽  
Author(s):  
Roman Inderst ◽  
Tommaso Valletti
Keyword(s):  
Price Discrimination ◽  
Input Markets
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