Working Paper: NBER ID: w22313
Authors: Bogdan Genchev; Julie Holland Mortimer
Abstract: Conditional pricing practices allow the terms of sale between a producer and a downstream distributor to vary based on the ability of the downstream firm to meet a set of conditions put forward by the producer. The conditions may require a downstream firm to accept minimum quantities or multiple products, to adhere to minimum market-share requirements, or even to deal exclusively with one producer. The form of payment from the producer to the downstream firm may take the form of a rebate, marketing support, or simply the willingness to supply inventory. The use of conditional pricing practices is widespread throughout many industries, and the variety of contractual forms used in these arrangements is nearly as extensive as the number of contracts. This paper reviews empirical evidence on these arrangements.
Keywords: conditional pricing; competition; consumer welfare; empirical research
JEL Codes: K0; K2; K20; K21; L0; L4; L42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Conditional Pricing Practices (CPPs) (L42) | Foreclosure of Rivals (G33) |
| Presence of Substitute Products (D10) | Mitigation of Adverse Effects of CPPs (D18) |
| Conditional Pricing Practices (CPPs) (L42) | Consumer Welfare (D69) |
| Contractual Terms (L14) | Exclusionary Effects of CPPs (L49) |
| Conditional Pricing Practices (CPPs) (L42) | Efficiency and Consumer Welfare (D61) |