Working Papers Quantity Discounts from Risk Averse Sellers

Which Will Overcome? The Productivity or Risk Premium

The study investigates consumers’ preference for cowpea reflected in the Nigerian markets through price discounts and premiums that consumers pay for different cowpea characteristics. The price data used for this study were obtained through a market survey. A common data collection protocol was employed. Every month, between October 2009 to December 2010, five cowpea samples per seller were bou...

Conspiracies and Secret Discounts in Laboratory Markets

This paper uses laboratory methods to evaluate whether price-fixing conspiracies break down in the presence of opportunities to offer secret discounts. The primary treatment difference is whether or not buyer-specific discounts from the posted list price are permitted. In standard posted-offer markets, conspiring sellers are able to find and maintain near-monopoly prices. But when the possibili...

Risk premiums and certainty equivalents of loss-averse newsvendors of bounded utility

Loss-averse behavior makes the newsvendors avoid the losses more than seeking the probable gains as the losses have more psychological impact on the newsvendor than the gains. In economics and decision theory, the classical newsvendor models treat losses and gains equally likely, by disregarding the expected utility when the newsvendor is loss-averse. Moreover, the use of unbounded utility to m...

Quantity Discounts: An Overview and Practical Guide for Buyers and Sellers

Exclusionary Discounts

We consider a two-period model with two sellers and one buyer in which the efficient outcome calls for the buyer to purchase one unit from each seller in each period. We show that when the buyer’s valuations between periods are linked by switching costs and at least one seller is financially constrained, there exist plausible conditions under which exclusion arises as the unique equilibrium out...