 Upstream uncertainty and countervailing powerHoward Smith and John Thanassoulis International Journal of Industrial Organization, 2012, vol. 30, issue 6, 483-495 Abstract: We study vertical contracting through bargaining between an upstream supplier and downstream retailers. We consider the effect of supplier uncertainty as to final volumes on the efficient bargains struck. Uncertainty causes retail price effects: large buyers wield countervailing power (deliver lower retail prices) if upstream marginal costs are decreasing. If there were no upstream uncertainty, downstream retail prices would be independent of buyer size. With enough uncertainty large buyers have buyer power also (secure advantageous input prices). Downstream mergers, or organic growth of a downstream firm, change the uncertainty facing the upstream supplier and so result in “waterbed effects” on other buyers. We show that uncertainty for suppliers can be generated by upstream competition. Keywords: Countervailing power; Buyer power; Waterbed effects; Bargaining interface; Supply chain uncertainty; Vertical contracts (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:30:y:2012:i:6:p:483-495 DOI: 10.1016/j.ijindorg.2012.07.002 Access Statistics for this article International Journal of Industrial Organization is currently edited by P. Bajari, B. Caillaud and N. Gandal More articles in International Journal of Industrial Organization from Elsevier |
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