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Robust Exclusion Through Loyalty Discounts, Einer Elhauge, Abraham L. Wickelgren
Robust Exclusion Through Loyalty Discounts, Einer Elhauge, Abraham L. Wickelgren
Abraham L. Wickelgren
We consider loyalty discounts whereby the seller promises to give buyers who commit to buy from it a lower price than the seller gives to uncommitted buyers. We show that an incumbent seller can use loyalty discounts to soften price competition between itself and a rival, which raises market prices to all buyers. Each individual buyer’s agreement to a loyalty discount externalizes most of the harm of that individual agreement onto all the other buyers. The resulting externality among buyers makes it possible for an incumbent to induce buyers to sign these contracts even if they reduce buyer and total …
Standardization As A Solution To The Reading Costs Of Form Contracts, Abraham L. Wickelgren
Standardization As A Solution To The Reading Costs Of Form Contracts, Abraham L. Wickelgren
Abraham L. Wickelgren
It is well-known that a monopolist cannot commit to offer a high quality contract to a consumer reading costs are postive. This paper shows that this also holds in a competitive environment with consumer heterogeneity if the contract space is unrestricted. If firms can offer standardized contracts from a finite set, however, each with a standardized name, this paper shows that, when reading costs are not too large, there exists an equilibrium in which firms offer the most efficient contracts from the set of named contracts and consumers purchase the most efficient contracts offered without incurring any reading costs.