The Countervailing Power Hypothesis when Dominant Retailers Function as Sales Promoters

Noriaki Matsushima and Shohei Yoshida ()

Manchester School, 2018, vol. 86, issue 5, 665-680

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 disagreement payoff influences the relation between the dominant retailer's bargaining power and the equilibrium retail price. If the market demand shrinks due to a breakdown in 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. We also find that an increase in the number of fringe retailers is more likely to increase the retail price if their number is large.

Date: 2018
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