Wholesale Price Discrimination in Global Sourcing

Abstract

Previous research has found price discrimination in business-to-consumer (B2C) markets, where buyers are end customers. There is limited research on suppliers' price-quoting behaviors and price discrimination in business-to-business (B2B) markets. It is unclear whether certain characteristics of B2B buyers, who are often representatives of firms and not end customers, would influence suppliers' pricing decisions. In this research, we study wholesale price discrimination by collaborating with a global trading company that runs a field experiment on a global sourcing marketplace. We find that there is no significant difference in the wholesale prices quoted to buyers selling in US and South African markets. We also find that suppliers quote significantly higher wholesale prices to White buyers than to Asian and Black buyers, regardless of country. However, price discrimination disappears when buyers present market information to suppliers, providing the lowest wholesale price offered by other suppliers in the market, whereas price discrimination remains when buyers present social information to suppliers, thereby indicating the buyer is referred by a previous customer. In addition, we show that market information can help buyers obtain a lower wholesale price because it signals a lower willingness to pay. Social information, however, can reduce price quotes for only Black and White buyers, but not for Asian (particularly Chinese) buyers.

Keywords: Price Discrimination, B2B Marketplace, Global Supply Chain, Market Information, Social Information