Abstract

This paper explores the indirect inflationary mechanism allowed by loss-leaders banning laws. In a model where a monopolist producer sells his product through vertically separated and differentiated retailers, we show that the ban of loss-leading can be used strategically by the producer to increase his wholesale price and pay the retailers through negotiated listing fees, thus raising his profit. The ban turns wholesale prices into floor prices, thus increasing resale price and lessening consumers’ welfare. These results are robust if the listing fees are two-part tariff.

Submitted: August 2, 2004 · Accepted: December 22, 2004 · Published: February 24, 2005

Recommended Citation

Allain, Marie-Laure and Chambolle, Claire (2005) "Loss-Leaders Banning Laws as Vertical Restraints," Journal of Agricultural & Food Industrial Organization: Vol. 3 : Iss. 1, Article 5.
Available at: http://www.bepress.com/jafio/vol3/iss1/art5