Robust Exclusion through Loyalty Discounts with Buyer Commitment

Robust Exclusion Through Loyalty Discounts With Buyer Commitment

Robust Exclusion Through Loyalty Discounts

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 h...

Anti-Competitive Exclusion and Market Division Through Loyalty Discounts

We show that loyalty discounts create an externality among buyers even without economies of scale or downstream competition, and whether or not buyers make any commitment. Each buyer who signs a loyalty discount contract softens competition and raises prices for all buyers. We prove that, provided the entrant’s cost advantage is not too large, with enough buyers, this externality implies that i...

Group Discounts Compatible with Buyer Privacy

We show how group discounts can be offered without forcing buyers to surrender their anonymity, as long as buyers can use their own computing devices (e.g. smartphone, tablet or computer) to perform a purchase. Specifically, we present a protocol for privacy-preserving group discounts. The protocol allows a group of buyers to prove how many they are without disclosing their identities. Coupled ...

WORKING PAPERS Naked Exclusion by a Dominant Supplier: Exclusive Contracting and Loyalty Discounts

FTC Bureau of Economics working papers are preliminary materials circulated to stimulate discussion and critical comment. The analyses and conclusions set forth are those of the authors and do not necessarily reflect the views of other members of the Bureau of Economics, other Commission staff, or the Commission itself. Upon request, single copies of the paper will be provided. References in pu...