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COMPOUND PRICING
Author(s) -
MCGEE JOHN S.
Publication year - 1987
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.1465-7295.1987.tb00742.x
Subject(s) - monopoly , economics , microeconomics , profit (economics) , price discrimination , predatory pricing , industrial organization
Compound pricing makes the price or availability of some goods conditional on the purchase (or non‐purchase) of other goods. Tie‐ins and requirements contracts, two well‐known examples, are analyzed here. Contrary to some opinion, such practices need not be innocuous or benign. This analysis shows that compound pricing can produce price, output, profit, and welfare results that are practically indistinguishable from those got when a firm increases its monopoly power in more obvious and direct ways. By some standards, the requirements and exclusive dealing contracts analyzed here are predatory.