- Toulouse School of Economics
mercoledì 6 giugno 2018
- Polo Santa Marta, Via Cantarane 24, Sala Vaona
Cross-subsidization arises naturally
when firms with different comparative advantages
compete for consumers with heterogeneous shopping
patterns. Firms then face a form of co-opetition,
as they offer substitutes for one-stop shoppers
and complements for multi-stop shoppers.
Competition for one-stop shoppers drives total
prices down to cost, but firms subsidize weak
products with the profit made on strong products.
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, which calls for a cautious
use of below-cost pricing regulations in competitive markets.
- Data pubblicazione
16 novembre 2017