Pivotal Buyers and Bargaining Position

Pivotal Buyers and Bargaining Position Securing sales to a large buyer can be pivotal to a supplier's decision to produce. While conventional wisdom suggests that being pivotal improves a buyer's bargaining position, the opposite is shown in a multilateral bargaining model. If other buyers' payments fall short of costs, a pivotal buyer must cover the shortfall or forfeit consumption. This affords leverage that the supplier lacks when bargaining with non‐pivotal buyers. The analysis illuminates contracting in markets with high fixed costs, such as cable television programming, motion pictures, and large‐scale project finance, and has implications for the FCC's horizontal ownership limits on cable system operators. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Industrial Economics Wiley

Pivotal Buyers and Bargaining Position

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Publisher
Wiley
Copyright
Copyright © 2003 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0022-1821
eISSN
1467-6451
D.O.I.
10.1111/j.0022-1821.2003.00207.x
Publisher site
See Article on Publisher Site

Abstract

Securing sales to a large buyer can be pivotal to a supplier's decision to produce. While conventional wisdom suggests that being pivotal improves a buyer's bargaining position, the opposite is shown in a multilateral bargaining model. If other buyers' payments fall short of costs, a pivotal buyer must cover the shortfall or forfeit consumption. This affords leverage that the supplier lacks when bargaining with non‐pivotal buyers. The analysis illuminates contracting in markets with high fixed costs, such as cable television programming, motion pictures, and large‐scale project finance, and has implications for the FCC's horizontal ownership limits on cable system operators.

Journal

The Journal of Industrial EconomicsWiley

Published: Dec 1, 2003

References

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