On the Unprofitability of Buyer Groups When Sellers Compete

Jeon, Doh-Shin and Menicucci, Domenico (2019) On the Unprofitability of Buyer Groups When Sellers Compete. Games and Economic Behavior, 115. pp. 265-288.

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Official URL: http://tse-fr.eu/pub/122893


We study how the formation of a buyer group affects buyer power when sellers compete and buyers operate in separate markets. Previous research (Inderst and Shaffer, 2007, and Dana, 2012) has considered a buyer group that can commit to an exclusive purchase and has found that the formation of a buyer group strictly increases buyer power unless buyers have identical preferences. In contrast, we assume that no commitment to exclusive purchases is possible. We find that the formation of a buyer group has no effect if each seller's cost function is concave. If it is strictly convex, the buyer group strictly reduces the buyers' total payoff as long as the Pareto-dominant equilibrium for sellers is played when a buyer group is formed.

Item Type: Article
Language: English
Date: 2019
Refereed: Yes
Uncontrolled Keywords: Buyer group, Buyer power, Competition in nonlinear tariffs, Discriminatory offers, Common agency
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 15 May 2019 14:03
Last Modified: 15 May 2019 14:03
OAI ID: oai:tse-fr.eu:122893
URI: http://publications.ut-capitole.fr/id/eprint/32270

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