Third-Degree Price Discrimination with Buyer Power

2009 ◽  
Vol 9 (1) ◽  
Author(s):  
Roman Inderst ◽  
Tommaso Valletti
Keyword(s):  
Price Discrimination ◽  
Outside Option ◽  
Uniform Pricing ◽  
Outside Options ◽  
Buyer Power ◽  
Pricing Power

Abstract This paper introduces a model of third-degree price discrimination where a seller's pricing power is constrained by buyers' outside options. Price uniformity performs more efficiently than discriminatory pricing, as uniform pricing allows weaker buyers to exploit the more attractive outside option of stronger buyers. This mechanism is markedly different from the mechanisms that are at work in case uniform pricing is imposed on an unconstrained monopolist.

scholarly journals Vertical Bargaining and Countervailing Power

2014 ◽  
Vol 6 (3) ◽  
pp. 106-135 ◽  
Author(s):  
Alberto Iozzi ◽  
Tommaso Valletti
Keyword(s):  
The Other ◽  
Nash Bargaining ◽  
Outside Option ◽  
Outside Options ◽  
Countervailing Power ◽  
Buyer Power ◽  
Stark Contrast ◽  
Bargaining Problems ◽  
Input Prices

We study a set of bilateral Nash bargaining problems between an upstream input supplier and several differentiated but competing retailers. If one bilateral bargain fails, the supplier can sell to the other retailers. We show that, in a disagreement, the other retailers' behavior has a dramatic impact on the supplier's outside options and, therefore, on input prices and welfare. We revisit the countervailing buyer power hypothesis and obtain results in stark contrast with previous findings, depending on the type of outside option. Our results apply, more generally, to the literature that incorporates negotiated input prices using bilateral Nash bargaining. (JEL C72, C78, D43, L13, L14, L81)

scholarly journals An economic analysis of ransomware and its welfare consequences

2020 ◽  
Vol 7 (3) ◽  
pp. 190023
Author(s):  
J. Hernandez-Castro ◽  
A. Cartwright ◽  
E. Cartwright
Keyword(s):  
Economic Analysis ◽  
Price Discrimination ◽  
Proof Of Concept ◽  
Welfare Costs ◽  
Pilot Survey ◽  
Uniform Pricing ◽  
The Future ◽  
Welfare Consequences ◽  
New Form

We present in this work an economic analysis of ransomware, a relatively new form of cyber-enabled extortion. We look at how the illegal gains of the criminals will depend on the strategies they use, examining uniform pricing and price discrimination. We also explore the welfare costs to society of such strategies. In addition, we present the results of a pilot survey which demonstrate proof of concept in evaluating the costs of ransomware attacks. We discuss at each stage whether the different strategies we analyse have been encountered already in existing malware, and the likelihood of them being implemented in the future. We hope this work will provide some useful insights for predicting how ransomware may evolve in the future.

Third-Degree Price Discrimination in the Presence of Subsidies

2006 ◽  
Vol 7 (4) ◽  
pp. 419-426 ◽  
Author(s):  
Stefan Felder
Keyword(s):  
Health Insurance ◽  
Price Discrimination ◽  
Drug Price ◽  
Classical Result ◽  
Insurance Coverage ◽  
Health Insurance Coverage ◽  
Total Output ◽  
Pharmaceutical Sector ◽  
Uniform Pricing

Abstract According to a classical result, a move from uniform pricing to third-degree price discrimination only improves welfare if total output increases. In this paper I show that the classical result fails in the presence of subsidies. This finding appears to be relevant for the pharmaceutical sector where a consumer pays a fraction of the actual drug price due to health insurance coverage.

The Impact of Uniform Pricing Regulations on Incentives to Generate and Disclose Accounting Information

2020 ◽  
Author(s):  
Anil Arya ◽  
Brian Mittendorf ◽  
Dae-Hee Yoon
Keyword(s):  
Price Discrimination ◽  
Accounting Information ◽  
Extensive Study ◽  
Economic Effects ◽  
Information Environment ◽  
Welfare Gains ◽  
Uniform Pricing ◽  
Input Markets ◽  
The Impact

A persistent question in industrial organization is whether regulations restricting price discrimination in input markets can promote efficiency. Despite the extensive study of the economic effects of input pricing regulations, the literature is bereft of an examination of the role of accounting information. In this paper, we seek to fill the gap by modeling the effects of uniform pricing restrictions in input markets on firms’ information generation and disclosure. In doing so, we find that information considerations present an impetus for uniform pricing requirements since they promote incentives for retail firms to both acquire and disclose relevant accounting information. In effect, by shielding retail firms from excessive supplier exploitation, uniform pricing regulations create a richer and more transparent information environment. This, then, leads to welfare gains and even benefits that can accrue naturally to all supply chain partners including the supplier, whose actions are constrained by the uniform pricing regulation. This paper was accepted by Brian Bushee, accounting.

Price Discrimination by Non‐uniform Pricing

1978 ◽  
Vol 1 (1) ◽  
pp. 7-7
Author(s):  
Brian T. Batchford
Keyword(s):  
Price Discrimination ◽  
Uniform Pricing

The dilemma of informal governance with outside option as solution

2015 ◽  
Vol 7 (1) ◽  
pp. 195-229 ◽  
Author(s):  
Daniel Verdier
Keyword(s):  
Information Transmission ◽  
Prisoner's Dilemma ◽  
Prisoner’S Dilemma ◽  
Informal Governance ◽  
Outside Option ◽  
Outside Options ◽  
Institutional Costs ◽  
Security Regimes

The efficiency-oriented part of the literature on informal governance points to institutional costs as a reason for governments to prefer to cooperate with each other through commitments that are not binding. Left unexplained is what I call the dilemma of informal governance: how informal governance copes with the problem of cheating, to which formal governance has traditionally provided the solution. I show that like-mindedness, the current solution to the dilemma, is convincing but underspecified. Working from a model of governance encompassing the three time-honored dimensions of obligation, precision, and delegation, I analytically explore two other solutions, one that fails, information transmission, another that works, outside option, which I borrow from the power-oriented part of the literature on informal governance. A key finding is that informal governance, despite being neither self-enforceable nor informative, is sustainable for mild Prisoner’s Dilemma (PD) types in the presence of outside options. I illustrate the model findings by tracing an historical correlation between power polarization and formalism in the design of security regimes.

scholarly journals Price Discrimination and Bargaining: Empirical Evidence from Medical Devices

2013 ◽  
Vol 103 (1) ◽  
pp. 145-177 ◽  
Author(s):  
Matthew Grennan
Keyword(s):  
Panel Data ◽  
Empirical Evidence ◽  
Price Discrimination ◽  
Medical Devices ◽  
Structural Model ◽  
Hospital Costs ◽  
Business Markets ◽  
Uniform Pricing ◽  
Theoretical Predictions ◽  
Business To Business

Many important issues in business-to-business markets involve price discrimination and negotiated prices, situations where theoretical predictions are ambiguous. This paper uses new panel data on buyer-supplier transfers and a structural model to empirically analyze bargaining and price discrimination in a medical device market. While many phenomena that restrict different prices to different buyers are suggested as ways to decrease hospital costs (e.g., mergers, group purchasing organizations, and transparency), I find that: (i) more uniform pricing works against hospitals by softening competition; and (ii) results depend ultimately on a previously unexplored bargaining effect. (JEL C78, L13, L14, L64)

Price discrimination or uniform pricing: Which colludes more?

2013 ◽  
Vol 120 (3) ◽  
pp. 379-383 ◽  
Author(s):  
Niklas Horstmann ◽  
Jan Krämer
Keyword(s):  
Price Discrimination ◽  
Uniform Pricing

scholarly journals The Ethics of Price Discrimination

2011 ◽  
Vol 21 (4) ◽  
pp. 633-660 ◽  
Author(s):  
Juan M. Elegido
Keyword(s):  
Price Discrimination ◽  
Average Rate ◽  
Rate Of Return ◽  
Uniform Pricing ◽  
Differential Pricing

ABSTRACT:Price discrimination is the practice of charging different customers different prices for the same product. Many people consider price discrimination unfair, but economists argue that in many cases price discrimination is more likely to lead to greater welfare than is the uniform pricing alternative—sometimes for every party in the transaction. This article shows i) that there are many situations in which it is necessary to engage in differential pricing in order to make the provision of a product possible; and ii) that in many such situations, the seller does not obtain an above-average rate of return. It concludes that price discrimination is not inherently unfair. The article also contends that even when conditions i) and/or ii) do not obtain, price discrimination is not necessarily unethical. In itself, the fact that some people get an even better deal than do others does not entail that the latter are wronged.

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