Title

All-units discounts as a partial foreclosure device

Document Type

Journal article

Source Publication

RAND Journal of Economics

Publication Date

Spring 1-1-2018

Volume

49

Issue

1

First Page

155

Last Page

180

Publisher

Wiley-Blackwell Publishing, Inc.

Abstract

We investigate the strategic effects of all-units discounts (AUDs) used by a dominant firm in the presence of a capacity-constrained rival. Due to the limited capacity of the rival, the dominant firm has a captive portion of the buyer's demand for the single product. As compared to linear pricing, the dominant firm can use AUDs to go beyond its captive portion by tying its captive demand with part of the competitive demand and partially foreclose its small rival. When the rival's capacity level is well below relevant demand, AUDs reduce the buyer's surplus.

DOI

10.1111/1756-2171.12220

Print ISSN

07416261

E-ISSN

17562171

Publisher Statement

Copyright © 2018, The RAND Corporation. Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Language

English

Recommended Citation

Chao, Y., Tan, G., & Wong, A. C. L. (2018). All-units discounts as a partial foreclosure device. RAND Journal of Economics, 49(1), 155-180. doi: 10.1111/1756-2171.12220

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