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Chen, Zhijun and Rey, Patrick
(2019)
Competitive cross-subsidization.
RAND Journal of Economics, vol. 50 (n° 3).
pp. 645-665.
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Abstract
Cross-subsidization arises naturally when firms with different comparative ad- vantages compete for consumers with diverse shopping patterns. Firms then face a form of co-opetition, being substitutes for one-stop shoppers and complements for multi-stop shoppers. Competition for one-stop shoppers then drives total prices down to cost, but firms subsidize weak products with the profit made on strong products. While firms and consumers would benefit from cooperation limiting cross- subsidization (e.g., through price caps), banning below-cost pricing instead increases firms’ profits at the expense of one-stop shoppers; this calls for a cautious use of below-cost pricing regulations in competitive markets.
| Item Type: | Article |
|---|---|
| Language: | English |
| Date: | 2019 |
| Refereed: | Yes |
| Uncontrolled Keywords: | cross-subsidization, shopping patterns, multiproduct competition, co-opetition |
| JEL Classification: | L11 - Production, Pricing, and Market Structure; Size Distribution of Firms L41 - Monopolization; Horizontal Anticompetitive Practices |
| Subjects: | B- ECONOMIE ET FINANCE |
| Divisions: | TSE-R (Toulouse) |
| Site: | UT1 |
| Date Deposited: | 21 Jan 2019 14:40 |
| Last Modified: | 10 Sep 2021 11:32 |
| OAI Identifier: | oai:tse-fr.eu:33262 |
| URI: | https://publications.ut-capitole.fr/id/eprint/30828 |
Available Versions of this Item
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Competitive Cross-Subsidization. (deposited 09 Jul 2014 17:40)
- Competitive cross-subsidization. (deposited 21 Jan 2019 14:40) [Currently Displayed]
