Posted: March 25th, 2013

Wal-Mart

In October 2004, a coalition of 160 retailers filed an antitrust complaint against Wal-Mart that alleged that Wal-Mart extracts “unfair” discounts from its suppliers that smaller retailers that compete with Wal-Mart don’t receive. For example, Wal-Mart apparently pays a lower price per automobile tire when its buys tires from Goodyear than small, local automobile tire sellers do. Setting aside what you might believe is “fair” or “unfair,” is there an economic rationale other than raw power for Wal-Mart paying lower prices for Goodyear tires than the corner tire store? Explain. If you believe there is such a rationale, then how will we determine when and if the discount is too large, economically speaking?

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