Template-Type: ReDIF-Paper 1.0
Title: Dual Pricing in a Model of Sales
Author-Name: Nicolas Schutz
Author-Email: schutz@uni-mannheim.de
Author-Name: Anton Sobolev
Author-Email: anton.sobolev@unimannheim.de
Classification-JEL: L13, L42, D43, D83
Keywords: dual pricing, price dispersion, search, vertical restraints

Abstract: 
We study the competitive effects of dual pricing, a vertical restraint that involves charging
a distributor a different price for units intended to be resold online than for units
intended to be resold offline. We develop a model in which a manufacturer contracts
with hybrid retailers, which sell the manufacturer’s product both in their brick-and-mortar
stores and through an online channel. We find that dual pricing allows the
manufacturer to induce the industry monopoly outcome whereas uniform pricing does
not. Yet, dual pricing does not necessarily harm consumers or society at large, as the
market outcome is distorted by market power regardless of whether dual or uniform
pricing is used. Indeed, we find that consumer surplus and aggregate surplus tend to
be higher under dual pricing if the online market is small, if the search costs faced by
offline consumers are high, and if the pass-through rate of cost increases is high.

Note: 
Length: 116
Creation-Date: 2025-03
Revision-Date:
File-URL: https://www.crctr224.de/research/discussion-papers/archive/dp678
File-Format: application/pdf
Handle: RePEc:bon:boncrc:CRCTR224_2025_678