Partial Collusion with Asymmetric Cross-Price Effects

This paper evaluates the incidence of a large cut in value-added taxes (VATs) for French sit-down restaurants in 2009. In contrast to previous studies, which only focus on the price effects of VAT reforms, we estimate the effects of the VAT cut on four groups: workers, firm owners, consumers, and suppliers of material goods. Using a difference-in-differences strategy on firm-level data, we find that: firm owners pocketed more than 55 percent of the VAT cut; consumers, sellers of material goods, and employees shared the remaining windfall with consumers benefiting the least; and the employment effects were limited. (JEL H22, H25, L83)

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Strategic Analysis of the Pricing Mechanisms in an Online Book Supply Chain in the Presence of Reference Price Effects

Journal of theoretical and applied electronic commerce research ◽

10.3390/jtaer16050084 ◽

2021 ◽

Vol 16 (5) ◽

pp. 1492-1516

Author(s):

Wenhua Hou ◽

Yuwen Zeng

Keyword(s):

Supply Chain ◽

Discount Rate ◽

Reference Price ◽

Stackelberg Game ◽

Lower Boundary ◽

Retail Price ◽

Reference Points ◽

Price Effects ◽

Retail Prices ◽

Online Book

(1) Background: A binding recommended retail price has been used in several markets in a variety of forms, and the book market is a typical example. Publishers sell books to online retailers at a unit wholesale discount computed on the cover price. Retailers are then allowed to set the retail price. Therefore, if consumers regard the cover prices as reference points, then they may be more likely to purchase books if retail prices are lower than the cover prices. (2) Methods: We develop a Stackelberg game model for a book supply chain to investigates how reference price effects affect retailers and publisher’s pricing strategies. (3) Results: The results show that retailers will sell printed books at a discount only when the publisher’s wholesale discount rate is not high. Further, as the intensity of the reference price effects increases, (a) the lower boundary of the wholesale discount rate rises, (b) publishers’ profits increase and (c) retailers’ profits increase relative to the level of consumers’ e-books acceptance. (4) Conclusions: This result is related to the fact that the online retailer, such as Amazon and JD.com, like to invoke reference price effects in consumers’ minds by highlighting the printed book’s discount rate.

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