This paper examines the welfare implication of banning price discrimination in the intermediate goods market in which a monopolistic supplier contracts with asymmetric downstream retailers. We demonstrate that the supplier has a strong incentive to manipulate the interdependent demand structure...

We examine the average equilibrium price when quantity setting oligopolies price discriminate. It is known that for the price discrimination extension of Cournot competition the average price is independent of the extent of price discrimination whenever the demand is linear. We show that this...

We visit the role of privatization in the location decision of firms in an industry where no firm can produce all varieties demanded. We demonstrate that the Nash equilibrium locations are socially optimal, in the presence of a publicly owned firm, notwithstanding the degree of privatization.

Payment networks typically differentiate interchange fees across different merchant sectors. This paper shows that it is generally efficient for a regulator to leave the decision on the structure of interchange fees to payment networks.

This paper examines the effects of obtaining a strategic advantage of becoming the leader in the market on insiders’ incentives to merge and consumer welfare. We show that being the market leader is privately profitable for the merging insiders. We also show that the leading merger would...

A new theory of loss-leader pricing is provided in which firms advertise low (below cost) prices for certain goods to signal that their other unadvertised (substitute) goods are not priced too high. The theory is applied to the pricing of upgrades. The results contrast with most existing...

This paper provides two characterizations of the retailer’s markup relative to the manufacturer’s markup in vertical relationships with homogeneous manufacturers and homogeneous retailers. We first show that retailer’s relative markup is equal to the ratio of the retail pass-through to the...

We develop a model of monopolistic competition that accounts for consumers’ heterogeneity in both incomes and preferences. This model makes it possible to study the implications of income redistribution on the toughness of competition. We show how the market outcome depends on the joint...

Consider the classical double marginalization problem of single-product successive monopolies. We show that the ratio of the cost pass-through at the final sale relative to that at the wholesale level is characterized by the curvature of inverse demand in the final market. We also apply...

We show that the entry of private profit-maximising firms makes the consumers worse off compared to having a nationalised monopoly. Such entry increases the nationalised firm’s profit, industry profit, and social welfare, at the expense of the consumers. Our result is important for competition...