Discriminatory Trade Promotions in Consumer Search Markets

Abstract

The paper shows that, in consumer search markets, discriminatory trade promotions create more profits for manufacturers than uniform pricing.

Input Price Discrimination, Demand Forms, And Welfare*

“…The effects of input price discrimination have been analysed under a broad range of scenarios, departing from the seminal contributions by Katz [1987] and DeGraba [1990]. These include, for instance, settings where firms rely on non‐linear wholesale contracts (O'Brien and Shaffer [1994]; Inderst and Shaffer [2009]; Herweg and Müller [2014, 2016]) or bargain over input prices (O'Brien [2014]), as well as environments with a threat of demand‐side substitution (Inderst and Valletti [2009]) or consumer search costs (Janssen and Reshidi [2018]). Others have studied the effects of heterogeneous levels of efficiency in converting inputs by the downstream firms (Yoshida [2000]), the effects of buyer power on other buyers' input prices (Inderst and Valletti [2011]), along with the effects of input price discrimination on the market structure downstream (Herweg and Müller [2012]).…”