Market Share Discounts and Investment Incentives

Sloev, Igor (2007): Market Share Discounts and Investment Incentives.

Abstract

The paper investigates pro- and anticompetitive e¤ects of the use of market share discounts (MSD�s). While MSD�s can be used for exploiting a dominant position and may lead to a welfare reduction, MSD�s also can serve as an e¢ cient device for the creation of incentives. Particularly, if a �nal demand for an upstream manufacturer�s good depends on a promotional e¤ort of a retailer, the manufacturer can e¤ectively use MSD�s to induce an optimal level of the retailer�s e¤ort. Moreover, it is possible that MSD�s have a positive impact both on the consumers�surplus and the total industry pro�ts. Thus the use of MSD�s should not be treated as an anticompetitive practice a priori, but rather it has to be judged on a case-by-case basis.

• Item Type: MPRA Paper
• Language: English
• Keywords: market-share discounts, vertical restraints, incentives
• Subjects: L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L25 - Firm Performance: Size, Diversification, and Scope; L - Industrial Organization > L4 - Antitrust Issues and Policies > L42 - Vertical Restraints ; Resale Price Maintenance ; Quantity Discounts; L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior > L22 - Firm Organization and Market Structure

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