Loss leading with salient thinkers

• 成果类型: Article
• 署名作者: Inderst, Roman; Obradovits, Martin
• 署名单位: Goethe University Frankfurt; University of Innsbruck
• 刊物名称: RAND JOURNAL OF ECONOMICS
• ISSN/ISSBN: 0741-6261
• DOI: 10.1111/1756-2171.12312
• 发表日期: 2020
• 页码: 260-278
• 关键词: model; COMPETITION; equilibria; consumers

摘要

In various countries, competition laws restrict retailers' freedom to sell their products below cost. A common rationale, shared by policymakers, consumer interest groups and brand manufacturers alike, is that such loss leading of products would ultimately lead to a race-to-the-bottom in product quality. Building on Varian's (1980) model of sales, we provide a foundation for this critique, though only when consumers are salient thinkers, putting too much weight on certain product attributes. But we also show how a prohibition of loss leading can backfire, as it may make it even less attractive for retailers to stock high-quality products, decreasing both aggregate welfare and consumer surplus.