Complementarities, below-cost pricing, and welfare losses

Arbeitspapier

We analyze below-cost pricing in retail markets and examine its impact on social welfare as well as on suppliers' incentives to invest in quality. Considering negotiations about a linear wholesale price between the retailer and her suppliers, we find that below-cost pricing aggravates the double marginalization problem and causes welfare losses compared to a regime where below-cost pricing is banned. Furthermore, suppliers have stronger incentives to invest in high quality products if a ban of below-cost pricing is enforced.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: DIW Discussion Papers ; No. 788

Classification and Topics

• Classification: Wirtschaft ; Firm Organization and Market Structure ; Vertical Restraints; Resale Price Maintenance; Quantity Discounts
• Subject: Complementarities ; Retailing ; Below-Cost Pricing ; Einzelhandelspreispolitik ; Niedrigpreisstrategie ; Verdrängungswettbewerb ; Lieferanten-Kunden-Beziehung ; Konsumgüterindustrie ; Produktqualität ; Verhandlungen ; Wohlfahrtseffekt ; Preisaufsicht ; Theorie

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): von Schlippenbach, Vanessa
• Event: Veröffentlichung
• (who): Deutsches Institut für Wirtschaftsforschung (DIW)
• (where): Berlin
• (when): 2008

Further information

• Handle: http://hdl.handle.net/10419/27312
• Last update: 10.03.2025, 11:42 AM CET