Episode Details

A discount is usually the shape of competition. But can the structure of a discount render the purchase of a cheaper rival more expensive?

This episode starts with a classic pricing problem in FTC v. Syngenta & Corteva. A company may charge more for units with high willingness to pay and less for additional units. It can be done through quantity discounts or nonlinear pricing. There is nothing wrong with that per se.

The puzzle starts when the rebate depends on the customer’s proportion of purchases from the seller, rather than just the total amount bought.

In a simple example, buying one more generic unit saves a mere 25 cents but risks the loss of a $1,250 rebate. The generic is cheaper, but switching is expensive.

This leaves two explanations: simple price discrimination or exclusion.

The episode asks what proof would separate them—and why internal pricing documents might be more important than the label on the discount.

Read the full article and graphic analysis: https://blog.econworks.com/p/when-is-a-discount-a-wall?r=562wri

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