Spending and Pricing to Deter Arbitrage
Bibliographic Data
| ID | 9703630 |
|---|---|
| Authors | Stephen W Salant (0000-0001-5407-4572, University of Michigan, corresponding author) |
| Year | 2024 |
| Volume | 134 |
| Issue | 662 |
| Pages | 2638-2654 |
| Publication date | 2024-08-22 |
| Peer Reviewed | Yes |
| Open Access | Yes |
| Type | ARTICLE |
| Venue | The Economic Journal (JOURNAL) |
| Journal identifiers | ISSN: 0013-0133 • E-ISSN: 1468-0297 |
| Publisher | Oxford University Press (PUBLISHER • GB) |
| DOI | 10.1093/ej/ueae023 |
| OpenAlex | W4393115653 |
| Language | EN |
| References cited | 12 |
This article presents examples of arbitrage deterrence from the pharmaceutical, chemical and auto industries. Based on these cases, it develops two models where a monopolist prices and spends to deter arbitrage. The models differ in whether the lower price is set by the firm or negotiated with a representative of consumers. In both models, imports into the high-price market are completely deterred, but the two markets are nonetheless linked by the threat of arbitrage. If this linkage is ignored and the absence of arbitrage is misattributed to exogenous factors, econometric estimates of firm bargaining power will be biased upwards
Arbitrage · Economics · Financial economics · Microeconomics · Merger and Competition Analysis
| Citation velocity | historical |
|---|---|
| Highly cited | No |