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Can Erutku
 
''Price-Discrimination with Nonlinear Contracts in Input Markets''
( 2012, Vol. 32 No.3 )
 
 
Most of the literature on price discrimination in input markets has focused on linear per-unit prices used by a monopolist supplier. Here, we provide a complete characterization of the equilibrium two-part tariffs, which can allow the monopolist supplier to obtain (at a minimum) the profit that an efficient downstream firm would earn. Depending on the characteristics of the industry, the supplier can find it profitable to monopolize the downstream market. Price discrimination with nonlinear contracts can nonetheless improve welfare as it can eliminate the double marginalization problem and remove an inefficient firm from the market.
 
 
Keywords: Price Discrimination, Nonlinear Contracts, Monopoly Profit.
JEL: L1 - Market Structure, Firm Strategy, and Market Performance: General
L4 - Antitrust Issues and Policies: General
 
Manuscript Received : Jan 21 2011 Manuscript Accepted : Jul 03 2012

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