Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5059519 | Economics Letters | 2013 | 4 Pages |
Abstract
Most-favored-customer (MFC) clauses are usually seen as anticompetitive co-ordination devices that firms adopt for the purpose of higher prices. Here, I examine the welfare impact of MFC clauses under endogenous product variety. Product variety is relevant because prospective higher prices from MFC clauses can be anticipated by multi-product firms in their provision of product lines. Under such circumstances, I find that these clauses can be socially harmful, but this is not always the case: they tend to be socially neutral for relatively large fixed costs of product-line assortment, harmful for intermediate costs, and beneficial for relatively small costs.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
LluÃs M. Granero,