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References (3)
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Aghion (1987)
Contracts as a Barrier to EntryThe American Economic Review, 77
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Calzolari (2013)
Competition with Exclusive Contracts and Market-Share DiscountsThe American Economic Review, 103
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Chao (2013)
Strategic Effects of Three-Part Tariffs under OligopolyInternational Economic Review, 54
- Publisher
- Wiley
- Copyright
- © 2018 The RAND Corporation
- ISSN
- 0741-6261
- eISSN
- 1756-2171
- DOI
- 10.1111/1756-2171.12220
- Publisher site
- See Article on Publisher Site
Abstract
We investigate the strategic effects of all‐units discounts (AUDs) used by a dominant firm in the presence of a capacity‐constrained rival. Due to the limited capacity of the rival, the dominant firm has a captive portion of the buyer's demand for the single product. As compared to linear pricing, the dominant firm can use AUDs to go beyond its captive portion by tying its captive demand with part of the competitive demand and partially foreclose its small rival. When the rival's capacity level is well below relevant demand, AUDs reduce the buyer's surplus.
Journal
The Rand Journal of Economics – Wiley
Published: Jan 1, 2018