Zhijun Chen et Patrick Rey, « Competitive Cross-Subsidization », IDEI Working Paper, 14 décembre 2013.


This paper analyzes competitive pricing policies by multiproduct firms facing heterogeneous buying patterns. We show that cross-subsidization arises when firms have comparative advantages on different products but are equally efficient overall: Firms earn a profit from multi-stop shoppers by charging positive margins on their strong products but, as price competition for one-stop shoppers drives total margins down to zero, they price weaker products below cost. Banning below-cost pricing leads to higher profits and higher prices for one-stop shoppers, and may reduce consumer surplus as well as total social welfare.


Bertrand competition; cross-subsidization; buying patterns; one-stop and multi-stop shopping;

Codes JEL

  • L11: Production, Pricing, and Market Structure • Size Distribution of Firms
  • L41: Monopolization • Horizontal Anticompetitive Practices

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