Buyer Group and Buyer Power When Sellers Compete

Doh-Shin Jeon and Domenico Menicucci

No 14-543, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: We study how the formation of a buyer group affects buyer power when sellers compete and buyers operate in separate markets. Previous research (Inderst and Shaffer, 2007, and Dana, 2012) has considered a buyer group that can commit to an exclusive purchase and has found that the formation of a buyer group strictly increases buyer power unless buyers have identical preferences. In contrast, we assume that no commitment to exclusive purchases is possible. We find that the formation of a buyer group has no effect if each seller's cost function is concave. If it is strictly convex, the buyer group strictly reduces the buyers'total payoff as long as the Pareto-dominant equilibrium for sellers is played when a buyer group is formed.

Keywords: Buyer Group; Buyer Power; Competition in Non-linear Tariffs; Discriminatory Offers; Common Agency (search for similar items in EconPapers)
JEL-codes: D4 K21 L41 L82 (search for similar items in EconPapers)
Date: 2014-11, Revised 2017-11
New Economics Papers: this item is included in nep-com, nep-cta, nep-law and nep-mic
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Working Paper: Buyer Group and Buyer Power When Sellers Compete (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:28819

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