Complementarity and Bargaining Power

Bonnet, Céline, Bouamra-Mechemache, Zohra and Richards, Timothy J. (2017) Complementarity and Bargaining Power. TSE Working Paper, n. 16-772, Toulouse

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Official URL: http://tse-fr.eu/pub/31531

Abstract

Bargaining power in vertical channels depends critically on the "disagreement profit" or the opportunity cost to each player should negotiations fail. In a multiproduct context, disagreement profit depends on the degree of substitutability among the products offered by the downstream retailer. Horn and Wolinsky (1988) use this fact to argue for the clear importance of complementarity relationships on bargaining power. We develop an empirical framework that is able to estimate the effect of retail complementarity on bargaining power, and margins earned by manufacturers and retailers in the French soft drink industry. We show that complementarity increases the strength of retailers' bargaining position, so their share of the total margin increases by almost 28% relative to the no-complementarity case.

Item Type: Monograph (Working Paper)
Language: English
Date: March 2017
Place of Publication: Toulouse
Uncontrolled Keywords: Bargaining power, complementary goods, Nash-in-Nash equilibrium, retailing, soft drinks, vertical relationships
JEL codes: D43 - Oligopoly and Other Forms of Market Imperfection
L13 - Oligopoly and Other Imperfect Markets
M31 - Marketing
Subjects: B- ECONOMIE ET FINANCE
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 17 Mar 2017 15:14
Last Modified: 21 Mar 2018 14:34
OAI ID: oai:tse-fr.eu:31531
URI: http://publications.ut-capitole.fr/id/eprint/23197

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