Premium
A Model of Shareholder Discounts
Author(s) -
Yin Xiangkang
Publication year - 2001
Publication title -
economic record
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.365
H-Index - 42
eISSN - 1475-4932
pISSN - 0013-0249
DOI - 10.1111/1475-4932.00006
Subject(s) - shareholder , consumption (sociology) , welfare , microeconomics , pareto principle , business , economics , monetary economics , market economy , finance , corporate governance , social science , operations management , sociology
Many companies supplying consumption goods and services provide their shareholders with price discounts. This paper presents a simple model describing shareholder discounts and consequent market equilibrium. It is found that shareholder discounts resemble many features of two‐part tariffs. The welfare analysis shows that the equilibrium outcomes with shareholder discounts are Pareto inefficient. Compared with uniform pricing, shareholder discounts unambiguously increase major shareholders’ wealth but their effects on consumers and society are generally ambiguous.