Abstract: With the dominance of whole industry chain gradually transferred from upstream manufacturers to downstream manufacturers, downstream manufacturers′ ability to control the market is rising continually, so downstream manufacturers′ bargaining power is also growing, which will lead to the price discrimination in the intermediate market by upstream manufacturers, and have “waterbed effect” on other downstream firms. Based on the perspective of bargaining theory and the market structure of upstream monopoly-downstream oligopoly, the article analyzes the competitive effect of price discrimination in intermediate market under the circumstances of both upstream and downstream firms having some bargaining power. The results show that when the upstream firms choose the downstream firms with strong bargaining power to carry out a unified pricing negotiation, consumers′ welfare under uniform pricing is higher than that under price discrimination; when upstream firms choose the downstream firms with lower bargaining power to carry out a unified pricing negotiation, consumers′ welfare under uniform pricing is lower than that under price discrimination; regardless of the upstream manufacturers choosing strong or weak downstream manufacturers to carry out price negotiation, downstream manufacturers′ profits and total social welfare under unified pricing are always higher than those under price discrimination situation. Therefore, the article concludes that the antitrust regulation of price discrimination in the intermediate market should take into account upstream and downstream manufacturers′ bargaining power and extend the “market dominance” standard to the “relative economic advantage”.

Key words: intermediate market, price discrimination, uniform pricing, bargaining