Strategic delays of delivery, market separation and demand discrimination

Abstract

We show that an adequate choice of delays to deliver a durable good allows a monopoly to reduce competition between his two retailers on two different markets. Instead of preventing each retailer from selling on both markets, the producer separates the markets by directing the choices of consumers between the retailers. The consumer whose willingness to pay is the lowest obtains the good later than the other, and both pay their highest valuations for the good: the producer perfectly discriminates the demand. The European car market where producers try to restrict competition between retailers is an application of our findings.delivery delays, discrimination, market separation, vertical restraints, European car market