IDEAS home Printed from https://ideas.repec.org/p/dpr/wpaper/0981r.html
   My bibliography  Save this paper

The Countervailing Power Hypothesis when Dominant Retailers Function as Sales Promoters

Author

Listed:
  • Noriaki Matsushima
  • Shohei Yoshida

Abstract

We consider a downstream oligopoly model with one dominant and several fringe retailers, who purchase a manufacturing product from a monopoly supplier. We then examine how the supplier's outside option influences the relation between the dominant retailer's bargaining power and the equilibrium retail price. If the market demand shrinks due to a breakdown of bargaining between the supplier and the dominant retailer, who works as a sales promoter for the product, there is a negative relation between the bargaining power and the retail price.

Suggested Citation

  • Noriaki Matsushima & Shohei Yoshida, 2016. "The Countervailing Power Hypothesis when Dominant Retailers Function as Sales Promoters," ISER Discussion Paper 0981r, Institute of Social and Economic Research, Osaka University, revised Jul 2017.
    • Handle: RePEc:dpr:wpaper:0981r
    as

    Download full text from publisher

    File URL: https://www.iser.osaka-u.ac.jp/library/dp/2016/DP0981R.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Clerides, Sofronis & Nearchou, Paris & Pashardes, Panos, 2008. "Intermediaries as quality assessors: Tour operators in the travel industry," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 372-392, January.
    2. Gaudin, Germain, 2016. "Pass-through, vertical contracts, and bargains," Economics Letters, Elsevier, vol. 139(C), pages 1-4.
    3. Germain Gaudin, 2018. "Vertical Bargaining and Retail Competition: What Drives Countervailing Power?," Economic Journal, Royal Economic Society, vol. 128(614), pages 2380-2413, September.
    4. Wujin Chu & Woosik Chu, 1994. "Signaling Quality by Selling Through a Reputable Retailer: An Example of Renting the Reputation of Another Agent," Marketing Science, INFORMS, vol. 13(2), pages 177-189.
    5. Alberto Iozzi & Tommaso Valletti, 2014. "Vertical Bargaining and Countervailing Power," American Economic Journal: Microeconomics, American Economic Association, vol. 6(3), pages 106-135, August.
    6. Howard P. Marvel & Stephen McCafferty, 1984. "Resale Price Maintenance and Quality Certification," RAND Journal of Economics, The RAND Corporation, vol. 15(3), pages 346-359, Autumn.
    7. Noriaki Matsushima, 2017. "Expanding distribution channels," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 24(3-4), pages 464-484, October.
    8. Chen, Zhiqi, 2003. "Dominant Retailers and the Countervailing-Power Hypothesis," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 612-625, Winter.
    9. 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.
    10. 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.
    11. Roman Inderst & Greg Shaffer, 2007. "Retail Mergers, Buyer Power and Product Variety," Economic Journal, Royal Economic Society, vol. 117(516), pages 45-67, January.
    12. Dobson, Paul W & Waterson, Michael, 1997. "Countervailing Power and Consumer Prices," Economic Journal, Royal Economic Society, vol. 107(441), pages 418-430, March.
    13. Can Erutku, 2005. "Buying power and strategic interactions," Canadian Journal of Economics, Canadian Economics Association, vol. 38(4), pages 1160-1172, November.
    14. von Ungern-Sternberg, Thomas, 1996. "Countervailing power revisited," International Journal of Industrial Organization, Elsevier, vol. 14(4), pages 507-519, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. 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.
    2. Yuta Kittaka & Noriaki Matsushima & Fuyuki Saruta, 2021. "Competition between physical and electronic content retailers," ISER Discussion Paper 1123, Institute of Social and Economic Research, Osaka University.
    3. Noriaki Matsushima & Shohei Yoshida, 2022. "The countervailing power hypothesis and contingent contracts," ISER Discussion Paper 1191, Institute of Social and Economic Research, Osaka University.
    4. Qiu Zhao, 2019. "The Influence of Buyer Power on Supply Chain Pricing with Downstream Competition," Sustainability, MDPI, vol. 11(10), pages 1-19, May.
    5. Kittaka, Yuta & Matsushima, Noriaki & Saruta, Fuyuki, 2022. "Negative effect of price-matching policy on traditional retailers in a dual-channel supply chain with different content formats," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 161(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. 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.
    2. Qiu Zhao, 2019. "The Influence of Buyer Power on Supply Chain Pricing with Downstream Competition," Sustainability, MDPI, vol. 11(10), pages 1-19, May.
    3. 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.
    4. Noriaki Matsushima & Shohei Yoshida, 2022. "The countervailing power hypothesis and contingent contracts," ISER Discussion Paper 1191, Institute of Social and Economic Research, Osaka University.
    5. 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.
    6. 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.
    7. Allain, Marie-Laure & Avignon, Rémi & Chambolle, Claire, 2020. "Purchasing alliances and product variety," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    8. 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.
    9. 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.
    10. Germain Gaudin, 2018. "Vertical Bargaining and Retail Competition: What Drives Countervailing Power?," Economic Journal, Royal Economic Society, vol. 128(614), pages 2380-2413, September.
    11. Aghadadashli, Hamid & Dertwinkel-Kalt, Markus & Wey, Christian, 2016. "The Nash bargaining solution in vertical relations with linear input prices," Economics Letters, Elsevier, vol. 145(C), pages 291-294.
    12. 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.
    13. Marie-Laure Allain & Rémi Avignon & Claire Chambolle & Hugo Molina, 2022. "Buying groups formation: what effects on competition in the retail industry? [Les centrales d’achat : quels enjeux de concurrence ?]," Post-Print halshs-03693375, HAL.
    14. Symeonidis, George, 2010. "Downstream merger and welfare in a bilateral oligopoly," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 230-243, May.
    15. Johansen, Bjørn Olav, 2012. "The Buyer Power Of Multiproduct Retailers: Competition With One-Stop Shopping," Working Papers in Economics 03/12, University of Bergen, Department of Economics.
    16. Patrice Bougette & Oliver Budzinski & Frédéric Marty, 2019. "Exploitative Abuse and Abuse of Economic Dependence: What Can We Learn From an Industrial Organization Approach?," Revue d'économie politique, Dalloz, vol. 129(2), pages 261-286.
    17. Inderst, Roman & Wey, Christian, 2007. "Buyer power and supplier incentives," European Economic Review, Elsevier, vol. 51(3), pages 647-667, April.
    18. Stéphane Caprice & Patrick Rey, 2015. "Buyer Power from Joint Listing Decision," Economic Journal, Royal Economic Society, vol. 125(589), pages 1677-1704, December.
    19. Andre Jungmittag, 2018. "The Direct and Indirect Effects of Product Market Regulations in the Retail Trade Sector," JRC Research Reports JRC112222, Joint Research Centre.
    20. Dertwinkel-Kalt, Markus & Wey, Christian, 2021. "Multi-Product Pricing and Minimum Resale Price Maintenance," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242338, Verein für Socialpolitik / German Economic Association.

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:dpr:wpaper:0981r. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Librarian (email available below). General contact details of provider: https://edirc.repec.org/data/isosujp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.