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CEIS-Tor Vergata is pleased to inform you that, on Friday October 14, 2011 at 12.00 pm, prof. Patrick Rey (Toulouse School of Economics) will present a paper on “Loss Leading as an Exploitative Practice†The Seminar will be held at the Faculty of Economics, University of Rome "Tor Vergata", B-building, 1° floor, room B Please, go to www.ceistorvergata.it for the complete list of seminars and events at CEIS. How to reach us: http://web.uniroma2.it/mobilita/index.html http://www.economia.uniroma2.it/area.asp?a=867 ABSTRACT Large retailers, enjoying substantial market power in some local markets, often compete with smaller retailers who carry a narrower range of products in a more efficent way. We ï¬nd that these large retailers can exercise their market power by adopting a loss-leading pricing strategy, which consists of pricing below cost some of the products also offered by smaller rivals, and raising the prices on the other products. In this way, the large retailers can better discriminate multi-stop shoppers from one-stop shoppers — and may even earn more proï¬t than in the absence of the more efficent rivals. Loss leading thus appears as an exploitative device, designed to extract additional surplus from multi-stop shoppers, rather than as an exclusionary instrument to foreclose the market, although the small rivals are hurt as a by-product of exploitation. We show further that banning below-cost pricing increases consumer surplus, small rivals’ proï¬ts, and social welfare. Our insights apply generally to industries where a ï¬rm, enjoying substantial market power in one segment, competes with more efficent rivals in other segments, and procuring these products from the same supplier generates customer-speciï¬c beneï¬ts. They also apply to complementary products, such as platforms and applications. There as well, our analysis provides a rationale for below-cost pricing based on exploitation rather than exclusion. Barbara Piazzi __________ Informazioni da ESET NOD32 Antivirus, versione del database delle firme digitali 6530 (20111010) __________ Il messaggio è stato controllato da ESET NOD32 Antivirus. www.nod32.it |
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