Buyer power from joint listing decision

Caprice, Stéphane and Rey, Patrick (2015) Buyer power from joint listing decision. Economic Journal, 125 (589). pp. 1677-1704.

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Official URL: http://tse-fr.eu/pub/28661

Abstract

We show that collective bargaining can enhance retailers’ buying power vis-àvis
their suppliers. We consider a model of vertically related markets, in which
an upstream leader faces a competitive fringe of less efficient suppliers and negotiates secretly with several firms that compete in a downstream market. We allow downstream firms to join forces in negotiating with suppliers, by creating a buyer group which selects suppliers on behalf of its members: each group member can then veto the upstream leader’s offer, in which case all group members turn to the fringe suppliers. Transforming individual listing decisions into a joint listing decision makes delisting less harmful for a group member; this, in turn enhances the group members’ bargaining position at the expense of the upstream leader. We also show that this additional buyer power can have an ambiguous impact on the upstream leader’s incentives to invest.

Item Type: Article
Language: English
Date: December 2015
Refereed: Yes
JEL codes: D43 - Oligopoly and Other Forms of Market Imperfection
L13 - Oligopoly and Other Imperfect Markets
L22 - Firm Organization and Market Structure - Markets vs. Hierarchies; Vertical Integration; Conglomerates; Subsidiaries
L42 - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 16 Mar 2015 14:51
Last Modified: 07 Mar 2018 13:23
OAI ID: oai:tse-fr.eu:28661
URI: http://publications.ut-capitole.fr/id/eprint/16613

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