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Retail Mergers: Buyer Power and Product Variety

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  • Inderst, Roman
  • Shaffer, Greg

Abstract

This Paper analyses the impact of retail mergers on product variety. We show that a merging firm may want to enhance its buyer power vis a vis suppliers by delisting products and committing to a ?single-sourcing? purchasing strategy. Anticipating this, suppliers will strategically choose to produce less differentiated products, which further reduces product variety. If negotiations are efficient the loss in product variety reduces overall industry profit and, possibly, also consumer welfare. With linear tariffs, however, there may be a countervailing effect as the more powerful retailer passes on lower input prices to final consumers.

Suggested Citation

  • Inderst, Roman & Shaffer, Greg, 2004. "Retail Mergers: Buyer Power and Product Variety," CEPR Discussion Papers 4236, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4236
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    More about this item

    Keywords

    Buyer power; Retailing; Horizontal mergers;
    All these keywords.

    JEL classification:

    • L00 - Industrial Organization - - General - - - General

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