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A model of shareholder discounts
journal contributionposted on 2001-03-01, 00:00 authored by Xiangkang YinXiangkang Yin
Many companies supplying consumption goods and services provide their shareholders with price discounts. This paper presents a simple model describing shareholder discounts and consequent market equilibrium. It is found that shareholder discounts resemble many features of two-part tariffs. The welfare analysis shows that the equilibrium outcomes with shareholder discounts are Pareto inefficient. Compared with uniform pricing, shareholder discounts unambiguously increase major shareholders' wealth but their effects on consumers and society are generally ambiguous.