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Empirical Evidence on Conditional Pricing Practices

Bogdan Genchev, Julie Holland Mortimer

NBER Working Paper No. 22313
Issued in June 2016, Revised in August 2016
NBER Program(s):Industrial Organization

Conditional pricing practices allow the terms of sale between a producer and a downstream distributor to vary based on the ability of the downstream firm to meet a set of conditions put forward by the producer. The conditions may require a downstream firm to accept minimum quantities or multiple products, to adhere to minimum market-share requirements, or even to deal exclusively with one producer. The form of payment from the producer to the downstream firm may take the form of a rebate, marketing support, or simply the willingness to supply inventory. The use of conditional pricing practices is widespread throughout many industries, and the variety of contractual forms used in these arrangements is nearly as extensive as the number of contracts. This paper reviews empirical evidence on these arrangements.

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Document Object Identifier (DOI): 10.3386/w22313

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