Premium
RATIONING BY SELLER'S PREFERENCE AND PACIAL PRICE DISCRIMINATION
Author(s) -
LEE CHUNG H.,
JR. E. H. WARREN.
Publication year - 1976
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.1976.tb00375.x
Subject(s) - rationing , commodity , preference , economics , microeconomics , purchasing , price discrimination , common value auction , finance , health care , operations management , economic growth
This paper investigates the behavior of a seller who has a preference for a certain group of customers. The seller maintains stable prices over time and supplements price rationing with a nonprice rationing. In this situation the preferred buyers would have priority over nonpreferred buyers in purchasing the commodity, and if the latter purchase the commodity they may be paying higher prices. It is proposed here that the premium paid by the nonpreferred buyers is a necessary bribe to induce the seller to forego his search for the preferred buyers.