Predatory Pricing in the Retailer Segment
Date Issued
2015
Date
2015
Author(s)
Hsiao, Yi-Huai
Abstract
In this paper we analyze how price competition between retailers would reduce wholesale price and the distribution of profits between manufacturers and retailers. In the model there is a monopoly manufacturer, whose produce needs to be sold through an incumbent retailer, who faces potential competition from an entrant retailer. The incumbent retailer may choose to accommodate the entry or use aggressive pricing to deter entry. Our model thus incorporates entry deterrence behaviors into a vertical supply-chain model. In equilibrium, entry deterrence executed by the incumbent retailer may repress the wholesale price of the manufacturer, and curtails the shore of profits to manufacturer. In addition, the predatory pricing taken by the downstream firm would alleviate the social welfare loss which results from the double-marginalization problem.
Subjects
Supply chain
Downstream entry
Predatory pricing
Double-marginalization
Type
thesis
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ntu-104-R02323016-1.pdf
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