Predatory Accommodation: Below-Cost Pricing without Exclusion in Intermediate Goods Markets
We show that below-cost pricing can arise in intermediate goods markets when a monopolist retailer negotiates sequentially with two suppliers of substitute products. Below-cost pricing by one supplier allows the retailer to extract rents from the second supplier. Thus, the retailer and one supplier can increase their joint profit at the expense of the second supplier. We consider the welfare implications of below-cost pricing (welfare can increase or decrease as a result of below-cost pricing) and provide suggestions for when the courts should view below-cost pricing in intermediate goods markets as anticompetitive and when they should not.
Year of publication: |
1999
|
---|---|
Authors: | Marx, Leslie M. ; Shaffer, Greg |
Published in: |
RAND Journal of Economics. - The RAND Corporation, ISSN 0741-6261. - Vol. 30.1999, 1, p. 22-43
|
Publisher: |
The RAND Corporation |
Saved in:
Online Resource
Saved in favorites
Similar items by person
-
Break-up fees and bargaining power in sequential contracting
Marx, Leslie M., (2010)
-
Rent shifting and the order of negotiations
Marx, Leslie M., (2007)
-
Upfront payments and exclusion in downstream markets
Marx, Leslie M., (2007)
- More ...