Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/301105 
Year of Publication: 
2024
Series/Report no.: 
Tinbergen Institute Discussion Paper No. TI 2024-048/VII
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
This paper develops a novel theory linking quantity discounts to bargaining power in scenarios where retailers, organized as a trade association, negotiate uniform wholesale prices with suppliers. Our theory predicts that suppliers offer greater quantity discounts in regional markets where they possess relatively less bargaining power, as a counterbalance to the higher national wholesale prices negotiated by the retailer trade association. We test these predictions using detailed product-level data from the Indian pharmaceutical industry, where significant geographic variations in quantity discounts are observed. Our findings provide empirical support for the proposed theory.
Subjects: 
quantity discounts
bargaining power
pharmaceuticals
India
JEL: 
L11
L42
D22
Document Type: 
Working Paper

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