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Online Appendix (201.29 KB).pdf

20101524_app.pdf
Preview of Online Appendix (201.29 KB)
🔗 Source: aeaweb.org
📊 Size: 201 KB
👤 Author: zche380
⬇️ Downloads: 66

Summary

The appendix proves two propositions related to loss leading as an exploitative practice. Proposition 1 shows that a firm can use loss leading to monopolize a market by setting a low price for one product to attract consumers who will also buy another product from the same firm. The firm's profit in this regime is higher than the monopolistic level. Proposition 2 derives the conditions under which the loss-leading outcome forms a Nash equilibrium, and the conditions under which this equilibrium is unique. The loss-leading outcome is immune to deviations by the rival firm if and only if the rival firm's profit from deviating is less than or equal to its profit from the loss-leading outcome. The appendix also shows that the condition for the loss-leading outcome to be a Nash equilibrium depends on the parameters of the model, including the demand function and the costs of shopping.

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Description

The appendix proves two propositions related to loss leading as an exploitative practice.

Technical Information

  • File Format: PDF
  • File Size: 201 KB
  • Pages: 18
  • Language: EN
  • Author: zche380
  • Total Downloads: 66
  • Last Updated: 3 hours ago

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© 2017 Your Stat Class. Latrica L. Williams ALL RIGHTS RESERVED.
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