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Buying power and strategic interactions

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  • Can Erutku

Abstract

. This paper shows that buying power at the retail level can lead to a rise in wholesale price. As a result, retailers without buying power may increase their retail price. Nevertheless, total surplus is non‐decreasing in the degree of buying power possessed by the ‘dominant’ retailer. JEL classification: L13 Pouvoir d’achat et interactions stratégiques. Ce mémoire montre que le pouvoir d’achat au niveau du commerce de détail peut mener à un accroissement dans les prix de gros. En conséquence, les détaillants qui n’ont pas de pouvoir d’achat peuvent accroître leurs prix au détail. Néanmoins, le surplus total ne décroît pas à mesure que le degré de pouvoir d’achat du détaillant s’accroît.

Suggested Citation

  • Can Erutku, 2005. "Buying power and strategic interactions," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 38(4), pages 1160-1172, November.
    • Handle: RePEc:wly:canjec:v:38:y:2005:i:4:p:1160-1172
    DOI: 10.1111/j.0008-4085.2005.00319.x
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    References listed on IDEAS

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    1. Dobson, Paul W & Waterson, Michael, 1997. "Countervailing Power and Consumer Prices," Economic Journal, Royal Economic Society, vol. 107(441), pages 418-430, March.
    2. Chen, Zhiqi, 2003. "Dominant Retailers and the Countervailing-Power Hypothesis," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 612-625, Winter.
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    Cited by:

    1. Jeon, Doh-Shin & Menicucci, Domenico, 2014. "Buyer Group and Buyer Power When Sellers Compete," TSE Working Papers 14-543, Toulouse School of Economics (TSE), revised Nov 2017.
    2. Noriaki Matsushima & Shohei Yoshida, 2016. "The countervailing power hypothesis when dominant retailers function as sales promoters," ISER Discussion Paper 0981, Institute of Social and Economic Research, Osaka University.
    3. Zhiqi Chen & Hong Ding & Zhiyang Liu, 2016. "Downstream Competition and the Effects of Buyer Power," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(1), pages 1-23, August.
    4. Sara Fisher Ellison & Christopher M. Snyder, 2010. "Countervailing Power In Wholesale Pharmaceuticals," Journal of Industrial Economics, Wiley Blackwell, vol. 58(1), pages 32-53, March.
    5. Hao Wang, 2010. "Buyer Power, Transport Cost and Welfare," Journal of Industry, Competition and Trade, Springer, vol. 10(1), pages 41-53, March.
    6. Rojas Christian & Lavoie Nathalie & Wang Shinn-Shyr, 2012. "Buyer Power and Vertically Differentiated Retailers," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 10(1), pages 1-28, July.
    7. Violeta Dimitrova, 2017. "Gross Margin and Buyer Power in Bulgarian Food Retailing," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 6, pages 172-188.
    8. Noriaki Matsushima & Shohei Yoshida, 2022. "The countervailing power hypothesis and contingent contracts," ISER Discussion Paper 1191, Institute of Social and Economic Research, Osaka University.
    9. Jeon, Doh-Shin & Menicucci, Domenico, 2019. "On the unprofitability of buyer groups when sellers compete," Games and Economic Behavior, Elsevier, vol. 115(C), pages 265-288.
    10. 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.
    11. Dipankar Das, 2019. "Multilayer of Suppliers Fixed Costs and Spatial Competition in the Upstream Market as a Source of Retailers Buying Power," Studies in Microeconomics, , vol. 7(2), pages 210-226, December.
    12. 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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    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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