An antitrust analysis of bundled loyalty discounts

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.     

Game theoretical perspectives on dual-channel supply chain competition with price discounts and pricing schemes

This paper evaluates the impact of price discount contracts and pricing schemes on the dual-channel supply chain competition. Channel conflict occurs when the supplier enters the online direct channel. Traditional contracts normally require tedious administrational participation, full information of the cost structures, and other factors. The introduction of simple price discount contracts aims at providing easy implementation and effective coordination results. From supplier Stackelberg, retailer Stackelberg, and Nash game theoretic perspectives, we show that the scenarios with price discount contracts can outperform the non-contract scenarios. In addition, we show consistent pricing scheme can reduce the channel conflict by inducing more profit to the retailer. The leader in the games might, but is not guaranteed to, have advantages.     

Streamlining inventory flows with time discounts to improve the profits of a decentralized supply chain

We consider a decentralized supply chain, whereby a supplier sells a product to a group of independent buyers, and develop a strategy for the supplier to offer an all-units price discount or cash rebate for orders that are synchronized with its replenishments. As synchronized orders can be met with inventory directly from receiving to shipping without warehousing, the proposed strategy streamlines system inventory flows to minimize inventory and, hence, the related costs. On the other hand, by increasing the replenishment interval of the supplier, the proposed strategy is able to induce buyers to order in large quantities and hence achieve the objectives of quantity discounts. We show that the proposed strategy can achieve nearly optimal (minimum) system cost, and is much more effective than the existing coordination strategies for decentralized supply chains in the literature.