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The countervailing power hypothesis in the dominant firm-competitive fringe model

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  • Christou, Charalambos
  • Papadopoulos, Konstantinos G.

Abstract

In the dominant firm-competitive fringe model, where firms purchase input from a common supplier via two-part tariff contracts, we demonstrate that countervailing power may be neutral. Unlike Chen (2003), more countervailing power may not lead to lower consumer prices.

Suggested Citation

  • Christou, Charalambos & Papadopoulos, Konstantinos G., 2015. "The countervailing power hypothesis in the dominant firm-competitive fringe model," Economics Letters, Elsevier, vol. 126(C), pages 110-113.
    • Handle: RePEc:eee:ecolet:v:126:y:2015:i:c:p:110-113
    DOI: 10.1016/j.econlet.2014.11.022
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    References listed on IDEAS

    as
    1. Chen, Zhiqi, 2003. "Dominant Retailers and the Countervailing-Power Hypothesis," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 612-625, Winter.
    2. Roman Inderst & Tommaso M. Valletti, 2011. "Buyer Power And The ‘Waterbed Effect’," Journal of Industrial Economics, Wiley Blackwell, vol. 59(1), pages 1-20, March.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Noriaki Matsushima & Shohei Yoshida, 2018. "The Countervailing Power Hypothesis when Dominant Retailers Function as Sales Promoters," Manchester School, University of Manchester, vol. 86(5), pages 665-680, September.
    2. Seok Yang & Myeonghwan Cho, 2024. "Pricing Third-Party Access to Essential Facilities under Asymmetric Information," Korean Economic Review, Korean Economic Association, vol. 40, pages 315-348.
    3. Andre Jungmittag, 2018. "The Direct and Indirect Effects of Product Market Regulations in the Retail Trade Sector," JRC Research Reports JRC112222, Joint Research Centre.
    4. Shohei Yoshida, 2018. "Bargaining power and firm profits in asymmetric duopoly: an inverted-U relationship," Journal of Economics, Springer, vol. 124(2), pages 139-158, June.
    5. Germain Gaudin, 2018. "Vertical Bargaining and Retail Competition: What Drives Countervailing Power?," Economic Journal, Royal Economic Society, vol. 128(614), pages 2380-2413, September.
    6. Christos Constantatos & Ioannis N. Pinopoulos, 2021. "On the choice of contract types in vertical relations," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(3), pages 531-538, April.
    7. Qiu Zhao, 2019. "The Influence of Buyer Power on Supply Chain Pricing with Downstream Competition," Sustainability, MDPI, vol. 11(10), pages 1-19, May.

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    More about this item

    Keywords

    Countervailing power; Buyer power; Dominant retailer; Competitive fringe; Two-part tariff;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation

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