Chapter 5: Market Conduct of Dominant Firms I
Utton2 02 chap 5 4/12/02 16:20 Page 85 5 Market conduct of dominant firms: I I Introduction Established firms seldom produce a single product at a uniform price for one market. The more usual case is supply of a range of products (or services) to a number of markets which may be separated geographically, physically or in time. In some markets, the firm may have considerable market power, in others practically none at all. Some markets may contain heavily differentiated products, while others may consist of well defined or graded homogeneous goods. Conditions on the buyer’s side of the market may also vary considerably. The same supplying firm may thus be confronted in some of its markets by two or three powerful customers, some of whom may be government agencies, while in others it may be selling to hundreds or thousands of separate retail stores. Once we move away, therefore, from considerations of a single market and a unique price we have to address the complex question of price discrimination in all its many guises. In a now classic discussion, Machlup (1955) distinguished three broad categories of price discrimination and, within those categories, a total of about 20 variations. Thus within the first category, where the individual is the basis of the discrimination, separate orders may be priced according to each person’s own negotiations or according to the intensity with which a sold or leased article is to be used. In the second category, where different groups are identified...
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