Downstream Competition and the Effects of Buyer Power

Downstream Competition and the Effects of Buyer Power We examine four variations of a model in which oligopolistic retailers compete in a downstream market and one of them is a large retailer that has its own exclusive supplier. We demonstrate that an increase in the buyer power of the large retailer vis-à-vis its supplier leads to a fall in the retail price and an improvement in consumer welfare. More interestingly, we find that the beneficial effects of an increase in buyer power are large when the intensity of downstream competition is low, with the effects being the largest in the case of downstream monopoly. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Downstream Competition and the Effects of Buyer Power

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Publisher
Springer US
Copyright
Copyright © 2016 by Springer Science+Business Media New York
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-016-9501-8
Publisher site
See Article on Publisher Site

Abstract

We examine four variations of a model in which oligopolistic retailers compete in a downstream market and one of them is a large retailer that has its own exclusive supplier. We demonstrate that an increase in the buyer power of the large retailer vis-à-vis its supplier leads to a fall in the retail price and an improvement in consumer welfare. More interestingly, we find that the beneficial effects of an increase in buyer power are large when the intensity of downstream competition is low, with the effects being the largest in the case of downstream monopoly.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Jan 18, 2016

References

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