Hjem
Institutt for økonomi
Seminar

Faculty seminar with Anastasia Leontiou

Welcome to seminar with Anastasia Leontiou, University of Vienna.

Hovedinnhold

Anastasia Leontiou - CV

 

Title: 

Loss-leading in vertical markets: The role of consumers’ loss aversion.

 

 

Abstract: 

This paper analyzes bait-and-switch pricing in a vertical market. A multiproduct retailer offers loss-leader deals to consumers with reference-dependent preferences à la Kőszegi and Rabin (2006), who perceive price disparities as stock scarcity. When faced with a stockout, consumers purchase higher-margin substitutes. Manufacturers offset losses from limited demand (driven by low stock) with supracompetitive wholesale prices, suppressing competition. This leads to double marginalization, which, counterintuitively, may enhance consumer welfare. Our findings highlight potential downsides of eliminating double marginalization through vertical mergers and below-cost pricing regulations while offering insights into cost pass-through by multiproduct retailers.