Industrial Organization Commons^™

All-Units Discounts As A Partial Foreclosure Device, Yong Chao, Guofu Tan

Yong Chao

All-units discounts (AUD) are pricing schemes that lower a buyer’s marginal price on every unit purchased when the buyer’s purchase exceeds or is equal to a pre-specified threshold. The AUD and related conditional rebates are commonly used in both final-goods and intermediate-goods markets. Although the existing literature has thus far focused on interpreting the AUD as a price discrimination tool, investment incentive program, or rent-shifting instrument, the antitrust concerns on the AUD and related conditional rebates are often their plausible exclusionary effects.

In this article, we investigate strategic effects of volume-threshold based AUD used by a dominant firm in the …

Nonlinear Pricing With Asymmetric Competition, Yong Chao, Guofu Tan, Adam Chi Leung Wong

Yong Chao

No abstract provided.

Tick Size Constraints, Two-Sided Markets, And Competition Between Stock Exchanges, Yong Chao, Chen Yao, Mao Ye

Yong Chao

We investigate competition between stock exchanges that choose the number of trading platforms to establish and the fee structure on each platform. U.S. exchanges compete for order flow by setting “make” fees for limit orders and “take” fees for market orders. When traders can quote continuous prices, the manner in which exchanges divide the total fee between makers and takers is irrelevant, because traders can choose prices that perfectly counteract any division of the fee. In such a case, order flow will simply consolidate to the platform with the lowest total fee. The one-cent minimum tick size constraints imposed by …

Strategic Effects Of Three-Part Tariffs Under Oligopoly, Yong Chao

Yong Chao

The distinct element of a three-part tariff, compared with linear pricing or a two-part tariff, is its quantity target within which the marginal price is zero. This quantity target instrument enriches the firm's strategy set in dictating the competition to a specific level, even in the absence of usual price discrimination motive. With general differentiated linear demand system, the competitive effect of a three-part tariff in contrast to linear pricing depends on the degree of substitutability between products: competition is intensified when two products are more differentiated, yet softened when two products are more substitutable.