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Small buyers

Author

Listed:
  • Chris Doyle

    (RBB Economics)

Abstract

We develop a model of retail competition and negotiations with an upstream supplier for several firms of different sizes. Contrary to existing thinking, we demonstrate that the larger a buyer the less countervailing power he possesses over the supplier. The reason for this is that a buyer's outside option - the ability to integrate backwards - becomes proportionately weaker as he grows in size as self-production is characterised by diseconomies of scale.

Suggested Citation

  • Chris Doyle, 2011. "Small buyers," Economics Bulletin, AccessEcon, vol. 31(1), pages 499-506.
    • Handle: RePEc:ebl:ecbull:eb-11-00003
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    File URL: http://www.accessecon.com/Pubs/EB/2011/Volume31/EB-11-V31-I1-P49.pdf
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    More about this item

    Keywords

    Buyer power; countervailing power;

    JEL classification:

    • L4 - Industrial Organization - - Antitrust Issues and Policies
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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