An antitrust analysis of bundled loyalty discounts |
| |
Authors: | Patrick Greenlee David Reitman David S Sibley |
| |
Institution: | aU.S. Department of Justice, 600 E Street NW, Suite 10000, Washington DC 20530, USA;bCRAI, 1201 F Street NW, Suite 700, Washington DC 20004, USA;cEconomics Department, University of Texas at Austin, 1 University Station #C3100, Austin TX 78712, USA |
| |
Abstract: | Consider a monopolist in one market that faces competition in a second market. Bundled loyalty discounts, in which customers receive a price break on the monopoly good in exchange for making all purchases from the monopolist, have ambiguous welfare effects. Such discounts should not always be treated as a form of predatory pricing. In some settings, they act as tie-in sales. Existing tests for whether such discounts violate competition laws do not track changes in consumer surplus or total surplus. We apply a new test to an illustrative example based on SmithKline that assumes the “tied” market has homogeneous goods. If the tied market is characterized by Hotelling competition, bundling by the monopolist causes the rival firm to reduce its price. In numerical examples, we find that this can deter entry or induce exit. |
| |
Keywords: | |
本文献已被 ScienceDirect 等数据库收录! |
|