The Simple Economics of Wholesale Price-Parity Agreements: The Case of the Airline Tickets Distribution Industry*

2020 ◽  
Author(s):  
Jorge Padilla ◽  
Salvatore Piccolo ◽  
Nadine Watson
Keyword(s):  
Competition Policy ◽  
Distribution Systems ◽  
Wholesale Price ◽  
Consumer Welfare ◽  
Distribution Channels ◽  
Retail Price ◽  
Competitive Effects ◽  
Global Distribution Systems ◽  
Airline Tickets ◽  
Strength Of Competition

Abstract This paper clarifies the differences between retail and wholesale price-parity agreements in vertical industries. In contrast to traditional wide and narrow retail price-parity arrangements, the competitive effects of wholesale price-parity depend on the complexity of the vertical supply chain, the business model operated by sellers and distributors, and the strength of competition between direct and indirect distribution channels. While retail price-parity agreements are almost always anticompetitive, wholesale price-parity agreements may positively affect consumer welfare when direct and indirect distribution channels are close substitutes. To demonstrate the relevance of our analysis for competition policy, we illustrate our findings by referring to an industry that has recently attracted policy and regulatory interest on both sides of the Atlantic: the airline ticket distribution industry. We find that, in this industry, while wholesale price-parity agreements always harm airlines, Global Distribution Systems (GDSs) have preferences more aligned with consumers: when consumers benefit from these provisions, GDSs benefit too. JEL: K21, L13, L40

scholarly journals The Influence of Buyer Power on Supply Chain Pricing with Downstream Competition

2019 ◽  
Vol 11 (10) ◽  
pp. 2924
Author(s):  
Qiu Zhao
Keyword(s):  
Supply Chain ◽  
Wholesale Price ◽  
Consumer Welfare ◽  
Retail Price ◽  
Retail Market ◽  
Pricing Decisions ◽  
Buyer Power ◽  
Downstream Competition ◽  
The Impact ◽  
Vertical Market

This paper aims to investigate the impact of buyer power on the wholesale price and retail price of, in the case, downstream competition. Based on a summary of the competitive characteristics of China’s retail market, a model of a vertical market was constructed to examine the influence of buyer power on the pricing decisions of manufacturers and retailers, and to analyze the mechanism of price decisions. The results showed that the buyer power of national retailers reduced the wholesale price, but the impact on local retailers remained uncertain. Although increasing buyer power initially increased the local retailer’s wholesale price and caused the ‘waterbed effect’, we found that this effect reverted when the buyer power reached a point at which the ‘anti-waterbed effect’ appeared. The opposite was true of the retail price. However, buyer power reduced the average retail price, and consumer welfare improved.

EXPRESS: Service Provision in Distribution Channels

2021 ◽  
pp. 002224372110738
Author(s):  
Haresh Gurnani ◽  
Shubhranshu Singh ◽  
Sammi Tang ◽  
Huaqing Wang
Keyword(s):  
Service Provision ◽  
Wholesale Price ◽  
Distribution Channel ◽  
Distribution Channels ◽  
Retail Price ◽  
Fixed Cost ◽  
Complex Product ◽  
Channel Service

Consumers may need help using an inherently complex product after purchase. This paper studies a manufacturer’s and a retailer’s incentives to provide pre-sales service and after-sales support in a distribution channel. The authors consider a model in which a manufacturer makes wholesale-price and channel-service decisions. Subsequently, a retailer makes retail-price and channel-service decisions. They find that, in the equilibrium, both channel members provide pre-sales service. If the fixed-cost investment needed to enhance the effectiveness of after-sales support is small, the manufacturer lets the retailer provide after-sales support. But when it is above a threshold and the retailer becomes unwilling to invest in providing after-sales support, the manufacturer steps in and invests in providing it. As expected, when the fixed cost is too large, the manufacturer also opts out of providing after-sales support. Interestingly, when the retailer provides after-sales support, the level of pre-sales service and the demand for after-sales support can simultaneously be the highest among all configurations. Finally, the authors demonstrate the robustness of their main results by studying alternative channel-service configurations.

Non-Price Effects of Mergers

2018 ◽  
Vol 63 (2) ◽  
pp. 155-168 ◽  
Author(s):  
Gregory T. Gundlach ◽  
Diana L. Moss
Keyword(s):  
Competition Policy ◽  
Price Competition ◽  
Consumer Welfare ◽  
Critical Discussion ◽  
Special Issue ◽  
Competitive Effects ◽  
Policy Responses ◽  
Merger Analysis ◽  
Price Effects

Mergers may impact price as well as non-price forms of competition in the form of product quality, variety, service, and innovation. This special issue of the Antitrust Bulletin examines the increasing importance of non-price dimensions of competition in merger analysis, the challenges that non-price effects pose for antitrust merger enforcement, and approaches for enhancing the analysis and role of non-price competition in merger enforcement decisions and competition policy responses. This is a critical discussion that informs the debate over the importance and adequacy of the consumer welfare standard, which is the prevailing standard for evaluating the competitive effects of mergers and nonmerger conduct.

Theory in closer contact with industrial life: American institutional economists on competition theory and policy

2021 ◽  
pp. 1-18
Author(s):  
Matthew T. Panhans ◽  
Reinhard Schumacher
Keyword(s):  
20Th Century ◽  
Competition Policy ◽  
Self Regulation ◽  
Consumer Welfare ◽  
Antitrust Enforcement ◽  
Mainstream Economic ◽  
Competition Theory ◽  
One Stage ◽  
Wide Range ◽  
Experimental Attitude

Abstract This paper investigates the views on competition theory and policy of the American institutional economists during the first half of the 20th century. These perspectives contrasted with those of contemporary neoclassical and later mainstream economic approaches. We identify three distinct dimensions to an institutionalist perspective on competition. First, institutionalist approaches focused on describing industry details, so as to bring theory into closer contact with reality. Second, institutionalists emphasized that while competition was sometimes beneficial, it could also be disruptive. Third, institutionalists had a broad view of the objectives of competition policy that extended beyond effects on consumer welfare. Consequently, institutionalists advocated for a wide range of policies to enhance competition, including industrial self-regulation, broad stakeholder representation within corporations, and direct governmental regulations. Their experimental attitude implied that policy would always be evolving, and antitrust enforcement might be only one stage in the development toward a regime of industrial regulation.

Implications of Price Matching in Supply Chain Negotiation

2021 ◽  
Author(s):  
Weixin Shang ◽  
Gangshu (George) Cai
Keyword(s):  
Supply Chain ◽  
Social Welfare ◽  
Wholesale Price ◽  
Consumer Welfare ◽  
Problem Definition ◽  
Nash Bargaining ◽  
Price Matching ◽  
The Impact ◽  
Multiple Buyers ◽  
Wholesale Pricing

Problem definition: Few papers have explored the impact of price matching negotiation (PM), in which a channel matches its price with the resulting wholesale price bargained by another channel, on firms’ performances, consumer welfare, and social welfare, with and without supply chain coordination. Academic/practical relevance: Negotiation has been widely seen in determining both uniform and discriminatory wholesale prices, which affect outcomes of competitive supply chain practices. Methodology: To characterize the PM mechanism, we use game theory and Nash bargaining theory to compare PM with simultaneous negotiation (SN) through a common-seller two-buyer differentiated Bertrand competition model. Results: Our analysis reveals that PM can benefit the seller but hurt all buyers, which is at odds with some fair wholesale pricing clauses intending to protect buyers. Under coordination with side payments, however, all firms can conditionally benefit more from PM than from SN. Despite firms’ gains, PM leads to less consumer utility and social welfare compared with SN, unless the second buyer in PM is considerably less powerful than the first buyer. Coordination further worsens PM’s negative impact on consumer utility and social welfare. Moreover, the existence of a spot market can increase the wholesale price in PM, hurting buyers, consumers, and society. Furthermore, the qualitative results about PM remain robust under an alternative disagreement point for PM, multiple buyers, and other extensions. Managerial implications: This paper delivers insights on when price matching in supply chain wholesale price negotiation can benefit a seller, buyers, consumers, and society in a variety of scenarios. It advocates how managers can use PM to their own advantages and provides rationale to decision makers for policy regulations regarding wholesale pricing.

scholarly journals Designing Competition Policy for Telecommunications

2008 ◽  
Vol 7 (4) ◽  
Author(s):  
Glen O. Robinson ◽  
Dennis L. Weisman
Keyword(s):  
Competition Policy ◽  
Consumer Welfare ◽  
Dynamic Efficiency ◽  
Short Term ◽  
Competitive Outcome ◽  
Static Efficiency ◽  
Competitive Process ◽  
Welfare Losses ◽  
Network Sharing

This paper explores the role of the essential facilities doctrine in circumscribing the scope of network sharing obligations in telecommunications. Among other things it argues that a proper application of the doctrine of essential facilities should recognize the prominence of dynamic over static efficiency in promoting consumer welfare. Regulators may be averse to recognizing these tradeoffs because unlike the behavior of prices the welfare losses from foregone innovation may be unobservable to the regulators' constituency. Moreover, an emphasis on dynamic efficiency requires the short-term regulator to take the "long view" – fostering the competitive process rather than emulating the competitive outcome.

scholarly journals The Influence of Economic Theories and Schools on Competition Law in terms of Vertical Agreements

2018 ◽  
Vol 11 (18) ◽  
pp. 153-180
Author(s):  
Zbigniew Jurczyk
Keyword(s):  
Competition Policy ◽  
Evaluation Criteria ◽  
Competition Law ◽  
Chicago School ◽  
Antitrust Law ◽  
Competitive Effects ◽  
Economic Theories ◽  
The Past ◽  
Antitrust Analysis ◽  
Harvard School

The paper aims at showing the influence and the views espoused by economic theories and schools of economics on competition policy embedded in antitrust law and conducted by competition authorities in the field of vertical agreements. The scope of the paper demonstrates how substantially the economization of antitrust law has changed the assessment as to the harmfulness of vertical agreements. The analysis of economic aspects of vertical agreements in antitrust analysis allows one to reveal their pro-competitive effects and benefits, with the consumer being their beneficiary. The basic instrument of the said economization is that antitrust bodies draw on specific economic models and theories that can be employed in their practice. Within the scope of the paper, the author synthesizes the role and influence of those models and schools of economics on the application of competition law in the context of vertical agreements. In presenting, one after another, the theories and schools of economics which used to, or are still dealing with competition policy the author emphasises that in its nature this impact was more or less direct. Some of them remain at the level of general principals and axiology of competition policy, while others, in contrast, delineate concrete evaluation criteria and show how the application of those criteria changes the picture of anti-competitive practices; in other words, why vertical agreements, which in the past used to be considered to restrain competition, are no longer perceived as such. The paper presents the models and recommendations of neoclassical economics, the Harvard School, the Chicago and Post-Chicago School, the ordoliberal school, the Austrian and neoAustrian school as well as the transaction cost theory.

scholarly journals Emergency Coordination Model of Fresh Agricultural Products’ Three-Level Supply Chain with Asymmetric Information

2016 ◽  
Vol 2016 ◽  
pp. 1-9 ◽  
Author(s):  
Juan Yang ◽  
Haorui Liu ◽  
Xuedou Yu ◽  
Fenghua Xiao
Keyword(s):  
Supply Chain ◽  
Asymmetric Information ◽  
Supply Chain Coordination ◽  
Wholesale Price ◽  
Nonlinear Function ◽  
Retail Price ◽  
Agricultural Products ◽  
Agricultural Product ◽  
Coordination Model ◽  
Emergency Events

In consideration of influence of loss, freshness, and secret retailer cost of products, how to handle emergency events during three-level supply chain is researched when market need is presumed to be a nonlinear function with retail price in fresh agricultural product market. Centralized and decentralized supply chain coordination models are studied based on asymmetric information. Optimal strategy of supply chain in dealing with retail price perturbation is caused by emergency events. The research reveals robustness for optimal production planning, wholesale price for distributors, wholesale price for retailers, and retail price of three-level supply chain about fresh agricultural products. The above four factors can keep constant within a certain perturbation of expectation costs for retailers because of emergency events; the conclusions are verified by numerical simulation. This paper also can be used for reference to the other related studies in how to coordinate the supply chain under asymmetric and punctual researches information response to disruptions.

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