Optimal Nonlinear Pricing by a Dominant Firm under Competition
| Autor: | Adam Chi Leung Wong, Guofu Tan, Yong Chao |
|---|---|
| Rok vydání: | 2022 |
| Předmět: | |
| Zdroj: | American Economic Journal: Microeconomics. 14:240-280 |
| ISSN: | 1945-7685 1945-7669 |
| Popis: | We consider a nonlinear pricing problem faced by a dominant firm which competes with a capacity-constrained minor firm for a downstream buyer who may purchase the product from the firms under complete information. Specifically, we analyze a three-stage game in which the dominant firm offers a general tariff first and then the minor firm responds with a per-unit price, followed by the buyer choosing her purchases. By establishing an equivalence between the subgame perfect equilibrium of our asymmetric competition game and the optimal mechanism in a “virtual” principal-agent model, we characterize the dominant firm's optimal nonlinear tariff, which exhibits convexity and yet can display quantity discounts. Our analysis provides a rationale for nonlinear pricing under competition in the absence of private information: The dominant firm can use unchosen offers to constrain its rival’s possible deviations and extract more surplus from the buyer. Antitrust implications are also discussed. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
|