Reverse Pricing and Revenue Sharing in a Vertical Market
Advancing in information technology has empowered firms with unprecedented flexibilitywhen interacting with each other. We compare welfare results in a vertical market(e.g., manufacturersand retailers) across several types of pricing strategies depending upon(1) which side(retailers or manufacturers) chooses retail prices and (2) whether there is revenue sharing orlinear pricing between the two sides. Our results are as follows. Under revenue sharing, retailprices (and thus industry profits) are higher if and only if they are chosen by the side featuringless competition. Under linear pricing, however, retail prices are higher if they are chosen bythe side featuring more competition (for linear demand functions). Relative to linear pricing,revenue sharing always leads to lower retail prices, higher consumer surplus and social surplus.However, the comparison on industry profits depends on the demand elasticity ratios. Revenuesharing raises industry profits when the elasticity ratios are small, but the results are reversedwhen the elasticity ratios are large.
Reverse pricing Revenue sharing Vertical relationship
Qihong Liu Jie Shuai
Department of Economics,University of Oklahoma;Nankai Institute of Economics,Nankai University
国际会议
The 8th Conference on Industrial Economics and Economic Theory(第八届产业经济学与经济理论国际研讨会)(IEET08)
济南
英文
124-124
2013-06-22（万方平台首次上网日期，不代表论文的发表时间）