Bonnet, Céline, Bouamra-Mechemache, Zohra and Molina, Hugo (2023) The Buyer Power Effect of Retail Mergers: An Empirical Model of Bargaining with Equilibrium of Fear. RAND Journal of Economics.

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Identification Number : 10.2139/ssrn.3938971


We develop a bilateral oligopoly framework with manufacturer-retailer bargaining to analyze the impact of retail mergers on market outcomes. We show that the surplus division between manufacturers and retailers depends on three bargaining forces and can be interpreted in terms of an “equilibrium of fear”. We estimate our framework in the French soft drink industry and find that retailers have greater bargaining power than manufacturers. Using counterfactual simulations, we highlight that retail mergers increase retailers’ fear of disagreement relative to that of manufacturers, which weakens their buyer power and leads to higher wholesale and retail prices.

Item Type: Article
Language: English
Date: 20 October 2023
Refereed: Yes
Place of Publication: Mount Morris
Uncontrolled Keywords: Bilateral oligopoly, Bargaining, Retail mergers, Soft drink industry
JEL Classification: C78 - Bargaining Theory; Matching Theory
D43 - Oligopoly and Other Forms of Market Imperfection
L11 - Production, Pricing, and Market Structure; Size Distribution of Firms
L13 - Oligopoly and Other Imperfect Markets
L14 - Transactional Relationships; Contracts and Reputation; Networks
L41 - Monopolization; Horizontal Anticompetitive Practices
L81 - Retail and Wholesale Trade; Warehousing; e-Commerce
Divisions: TSE-R (Toulouse)
Site: UT1
Date Deposited: 12 Apr 2024 12:59
Last Modified: 12 Apr 2024 12:59
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