Small buyers

Chris Doyle ()
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Chris Doyle: RBB Economics

Economics Bulletin, 2011, vol. 31, issue 1, 499-506

Abstract: We develop a model of retail competition and negotiations with an upstream supplier for several firms of different sizes. Contrary to existing thinking, we demonstrate that the larger a buyer the less countervailing power he possesses over the supplier. The reason for this is that a buyer's outside option - the ability to integrate backwards - becomes proportionately weaker as he grows in size as self-production is characterised by diseconomies of scale.

Keywords: Buyer power; countervailing power (search for similar items in EconPapers)
JEL-codes: L1 L4 (search for similar items in EconPapers)
Date: 2011-02-03
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