Caprice, Stéphane and Shekhar, Shiva (2017) On the countervailing power of large retailers when shopping costs matter. TSE Working Paper, n. 17-771, Toulouse

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We consider a set-up with vertical contracting between a supplier and a retail industry where a large retailer competes with smaller retailers that carry a narrower range of products. Consumers are heterogeneous in their shopping costs; they will either be multistop shoppers or one-stop shoppers. The countervailing power of the large retailer is modeled as a threat of demand-side substitution. We show that retail prices are higher, and industry surplus and social welfare fall, when the large retailer possesses countervailing power. Increasing marginal wholesale prices discourages multistop shopping behavior of consumers, making demand substitution less attractive for the large retailer.

Item Type: Monograph (Working Paper)
Language: English
Date: March 2017
Place of Publication: Toulouse
Uncontrolled Keywords: countervailing power, buyer power, polarization of the retail industry, shopping costs
JEL Classification: D43 - Oligopoly and Other Forms of Market Imperfection
L13 - Oligopoly and Other Imperfect Markets
L40 - General
L81 - Retail and Wholesale Trade; Warehousing; e-Commerce
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 17 Mar 2017 15:16
Last Modified: 28 Jun 2021 15:00
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