IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-03346335.html
   My bibliography  Save this paper

The Balance of Power Between Producers and Retailers : a Differentiation Model

Author

Listed:
  • Marie-Laure Allain

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique)

Abstract

This paper argues that the balance of power between producers and retailers depends on the relative degrees of differentiation at the two levels of the vertical structure. We propose an extension of Hotelling's model in which two producers, competing in prices with horizontally differentiated products, face two horizontally differentiated retailers also competing in prices. We study the setting of producers' and retailers' margins. We show that when retailers are more differentiated than producers, they dominate the relationship and their margin is higher than producers'.
(This abstract was borrowed from another version of this item.)
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Marie-Laure Allain, 2002. "The Balance of Power Between Producers and Retailers : a Differentiation Model," Post-Print hal-03346335, HAL.
    • Handle: RePEc:hal:journl:hal-03346335
    Note: View the original document on HAL open archive server: https://hal.science/hal-03346335
    as

    Download full text from publisher

    File URL: https://hal.science/hal-03346335/document
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Katz, Michael L., 1989. "Vertical contractual relations," Handbook of Industrial Organization, in: R. Schmalensee & R. Willig (ed.), Handbook of Industrial Organization, edition 1, volume 1, chapter 11, pages 655-721, Elsevier.
    2. William Comanor & Patrick Rey, 2000. "Vertical Restraints and the Market Power of Large Distributors," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 17(2), pages 135-153, September.
    3. Daniel P. O'Brien & Greg Shaffer, 1992. "Vertical Control with Bilateral Contracts," RAND Journal of Economics, The RAND Corporation, vol. 23(3), pages 299-308, Autumn.
    4. Carmen Matutes & Pierre Regibeau, 1988. ""Mix and Match": Product Compatibility without Network Externalities," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 221-234, Summer.
    5. Patrick Rey & Joseph Stiglitz, 1995. "The Role of Exclusive Territories in Producers' Competition," RAND Journal of Economics, The RAND Corporation, vol. 26(3), pages 431-451, Autumn.
    6. Greg Shaffer, 1991. "Slotting Allowances and Resale Price Maintenance: A Comparison of Facilitating Practices," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 120-135, Spring.
    7. Mills, David E, 1995. "Why Retailers Sell Private Labels," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(3), pages 509-528, Fall.
    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. Fabian Bergès & Claire Chambolle, 2009. "Threat of Exit as a Source of Bargaining Power," Recherches économiques de Louvain, De Boeck Université, vol. 75(3), pages 353-368.
    2. Vettas, Nikolaos & Kourandi, Frago, 2010. "Endogenous Spatial Differentiation with Vertical Contracting," CEPR Discussion Papers 7948, C.E.P.R. Discussion Papers.
    3. 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.
    4. Vanessa von Schlippenbach & Isabel Teichmann, 2012. "The Strategic Use of Private Quality Standards in Food Supply Chains," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(5), pages 1189-1201.
    5. Delphine Godefroit-Winkel & Lisa Peñaloza, 2024. "The Ethics of Freedom in Consumption: An Ethnographic Account of the Social Dimensions of Supermarket Shopping for Moroccan Women," Journal of Business Ethics, Springer, vol. 189(3), pages 479-506, January.
    6. Vickner, Steven S. & Davies, Stephen P. & Fulton, Joan R. & Vantreese, Valerie L., 2000. "Estimating Market Power And Pricing Conduct For Private-Label And National Brands In A Product-Differentiated Oligopoly: The Case Of A Frozen Vegetable Market," Journal of Food Distribution Research, Food Distribution Research Society, vol. 31(2), pages 1-13, July.
    7. Li, Shengyu & Luo, Rong, 2020. "Non-Exclusive Dealing with Retailer Differentiation and Market Penetration," International Journal of Industrial Organization, Elsevier, vol. 70(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. Bakó, Barna & Kálecz-Simon, András, 2012. "Vertikális korlátozások - növelik vagy csökkentik a jólétet?. Érvek az irodalomból [Vertical constraints - do they increase or reduce welfare?. Arguments in the literature]," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(10), pages 1138-1159.
    2. Staahl Gabrielsen, Tommy & Johansen, Bjørn Olav & Shaffer, Greg, 2018. "When is Double Marginalization a Problem?," Working Papers in Economics 7/18, University of Bergen, Department of Economics.
    3. Hiroshi Kitamura & Noriaki Matsushima & Misato Sato, 2024. "How Does Downstream Firms’ Efficiency Affect Exclusive Supply Agreements?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 64(2), pages 219-242, March.
    4. Sheldon, Ian M., 2017. "The Competitiveness Of Agricultural Product And Input Markets: A Review And Synthesis Of Recent Research," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 49(1), pages 1-44, February.
    5. Allain, Marie-Laure & Chambolle, Claire, 2011. "Anti-competitive effects of resale-below-cost laws," International Journal of Industrial Organization, Elsevier, vol. 29(4), pages 373-385, July.
    6. Oana Secrieru, 2006. "The Economic Theory Of Vertical Restraints," Journal of Economic Surveys, Wiley Blackwell, vol. 20(5), pages 797-822, December.
    7. Rosenkranz, Stephanie & Schmitz, Patrick W., 2001. "Vertikale Unternehmenskooperationen," MPRA Paper 6930, University Library of Munich, Germany.
    8. repec:bla:jecsur:v:12:y:1998:i:4:p:333-59 is not listed on IDEAS
    9. Li, Shengyu & Luo, Rong, 2020. "Non-Exclusive Dealing with Retailer Differentiation and Market Penetration," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    10. Bruno Jullien & Patrick Rey, 2007. "Resale price maintenance and collusion," RAND Journal of Economics, RAND Corporation, vol. 38(4), pages 983-1001, December.
    11. Foros, Øystein & Kind, Hans Jarle & Shaffer, Greg, 2011. "Resale price maintenance and restrictions on dominant firm and industry-wide adoption," International Journal of Industrial Organization, Elsevier, vol. 29(2), pages 179-186, March.
    12. Emanuele Bacchiega & Olivier Bonroy & Emmanuel Petrakis, 2018. "Contract contingency in vertically related markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(4), pages 772-791, October.
    13. Fabian Bergès & Zohra Bouamra-Mechemache, 2012. "Is producing a private label counterproductive for a branded manufacturer?," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 39(2), pages 213-239, April.
    14. Milliou, Chrysovalantou & Petrakis, Emmanuel, 2007. "Upstream horizontal mergers, vertical contracts, and bargaining," International Journal of Industrial Organization, Elsevier, vol. 25(5), pages 963-987, October.
    15. Fumagalli, Chiara & Motta, Massimo, 2001. "Upstream mergers, downstream mergers, and secret vertical contracts," Research in Economics, Elsevier, vol. 55(3), pages 275-289, September.
    16. Kang, Yeongjae, 1996. "Unobservable Vertical Restraints and Interbrand Competition," SSE/EFI Working Paper Series in Economics and Finance 136, Stockholm School of Economics.
    17. Pagnozzi, Marco & Piccolo, Salvatore & Reisinger, Markus, 2021. "Vertical contracting with endogenous market structure," Journal of Economic Theory, Elsevier, vol. 196(C).
    18. John Asker & Heski Bar-Isaac, 2012. "Vertical Practices Facilitating Exclusion," Working Papers 12-20, New York University, Leonard N. Stern School of Business, Department of Economics.
    19. Symeonidis, George, 2010. "Downstream merger and welfare in a bilateral oligopoly," International Journal of Industrial Organization, Elsevier, vol. 28(3), pages 230-243, May.
    20. Robert Innes & Stephen F. Hamilton, 2009. "Vertical restraints and horizontal control," RAND Journal of Economics, RAND Corporation, vol. 40(1), pages 120-143, March.
    21. Rey, Patrick & Vergé, Thibaud, 2016. "Secret contracting in multilateral relations," TSE Working Papers 16-744, Toulouse School of Economics (TSE), revised Dec 2020.

    More about this item

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L22 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Organization and Market Structure

    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:hal:journl:hal-03346335. 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: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    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.