As a consequence, it is not possible to draw any general conclusions regarding the social welfare effects of quantity discount contracts when they apply to interfirm transactions.
Specifically, we examine the use of single-product quantity discounts as both an exclusionary, anticompetitive strategy and an efficiency-promoting procompetitive weapon.
EXCLUSIONARY EFFECTS: QUANTITY DISCOUNTS AS A BARRIER TO ENTRY
In order to evaluate the effects of quantity discounts on entry, we consider the case where B has demand for two units of the input, with value $1 each.
EFFICIENCY EFFECTS: QUANTITY DISCOUNTS AS A COMPETITIVE WEAPON
The preceding section demonstrates that quantity discounts can retard efficient entry and thereby reduce social welfare.
Because these assumed conditions cannot be expected to hold in all instances in which quantity discounts are observed, however, the question that naturally arises at this point is: What are the competitive effects of quantity discounts likely to be under different market conditions?
To begin, it should be noted that quantity discounts are a form of price discrimination.
Suppliers throughout the state are well advised to carefully qualify their retail chain accounts to make sure that exact common legal ownership exists whenever group quantity discounts to all outlets in a group are given.
If retail outlets are simply affiliated, rather than being under exact common legal ownership, the pool buying provisions are the only mechanism available to obtain group quantity discounts for spirits products without running afoul of the price discrimination provisions of Section 25503(e) of the ABC Act.
Likewise, a chain of identified entities whose ABC licenses are actually held by different partnerships or different management companies (which is common in hotel, restaurant and convenience store accounts) cannot avail themselves of group quantity discounts based upon total product purchases by all outlets carrying the common identifier (such as the "chain" name or "dba").