Most-Favored-Customer Pricing and Tacit Collusion

Cooper, Thomas E.

doi:10.2307/2555718

Cited by 152 publications

(79 citation statements)

References 9 publications

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“…With an MFN in effect between an upstream seller of some input and an incumbent downstream firm, a subsequent downstream entrant will find it more difficult to obtain a price from the seller low enough to make entry profitable. This occurs for the same reasons that discounts to late-arriving final buyers are less attractive in Cooper (1986), Schnitzer (1994), and Cooper and Fries (1991).…”

Section: Relationship To Traditional Most-favored-nation Agreementsmentioning

confidence: 99%

The Effects of Platform Most-Favored-Nation Clauses on Competition and Entry

Boik

Corts

2016

The Journal of Law and Economics

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In the context of sellers who sell their products through intermediary platforms, a platform most-favored-nation (PMFN) clause is a contractual restriction requiring that a particular seller will not sell at a lower price through a platform other than the one with which it has the PMFN agreement. Contractual restrictions observed in markets for e-books and travel services, among other settings, can be viewed as examples of this phenomenon. We show that PMFN clauses typically raise platform fees and retail prices and curtail entry or skew positioning decisions by potential entrants pursuing low-end business models.

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Section: Relationship To Traditional Most-favored-nation Agreementsmentioning

confidence: 99%

The Effects of Platform Most-Favored-Nation Clauses on Competition and Entry

Boik

Corts

2016

The Journal of Law and Economics

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“…9 See the survey by Lyon (1998). 10 See, for example, Salop (1986) and Cooper (1986). More recent work along these lines includes Besanko and Lyon (1993), Schnitzer (1994), McAfee and Schwartz (1994), and Marx and Shaffer (2000).…”

Section: The Modelmentioning

confidence: 99%

The Use of 'Most-Favored-Nation' Clauses in Settlement of Litigation

Spier

2001

SSRN Journal

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“…Further, we nd that loyalty discounts have anticompetitive e ects under very di erent conditions than are assumed in the literature on most-favored nation clauses. Most articles on most favored nations clauses have found anticompetitive e ects because they assumed oligopolistic coordination, see Cooper (1986), or because they assumed a monopolist selling a durable good that might use such clauses to restrain competition by itself later in time, Butz (1990); Marx & Sha er (2004). None of those assumptions is necessary to show anticompetitive e ects from loyalty discounts under the model o ered here.…”

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confidence: 91%

Anticompetitive Market Division through Loyalty Discounts without Buyer Commitment

Elhauge¹,

Wickelgren

2012

SSRN Journal

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We show that loyalty discounts without buyer commitment create an externality among buyers because each buyer who signs a loyalty discount contract softens competition and raises prices for all buyers. This externality can enable an incumbent to use loyalty discounts to effectively divide the market with its rival and raise prices. We prove that, provided the entrant's cost advantage is not too large, with enough buyers, this externality implies that in any equilibrium some buyers sign loyalty discount contracts, segmenting the market and reducing consumer welfare and total welfare. These propositions are true even if the buyers coordinate, the entrant is more efficient, the loyalty discounts cover less than half the market, and all the loyalty discounts are above cost. We also prove that these propositions hold even if we assume no economies of scale, no downstream competition, no buyer switching costs, no financial constraints, no limits on rival expandability, and no intraproduct bundle of contestable and incontestable demand.JEL: C72, K0, K21, L12, L40, L41, L42

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Most-Favored-Customer Pricing and Tacit Collusion

Cited by 152 publications

References 9 publications

The Effects of Platform Most-Favored-Nation Clauses on Competition and Entry

The Effects of Platform Most-Favored-Nation Clauses on Competition and Entry

The Use of 'Most-Favored-Nation' Clauses in Settlement of Litigation

Anticompetitive Market Division through Loyalty Discounts without Buyer Commitment

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