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The Influence of Buyer Power on Supply Chain Pricing with Downstream Competition

Qiu Zhao ()
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Qiu Zhao: School of Business Administration, Northeastern University, Shenyang 110169, China

Sustainability, 2019, vol. 11, issue 10, 1-19

Abstract: This paper aims to investigate the impact of buyer power on the wholesale price and retail price of, in the case, downstream competition. Based on a summary of the competitive characteristics of China’s retail market, a model of a vertical market was constructed to examine the influence of buyer power on the pricing decisions of manufacturers and retailers, and to analyze the mechanism of price decisions. The results showed that the buyer power of national retailers reduced the wholesale price, but the impact on local retailers remained uncertain. Although increasing buyer power initially increased the local retailer’s wholesale price and caused the ‘waterbed effect’, we found that this effect reverted when the buyer power reached a point at which the ‘anti-waterbed effect’ appeared. The opposite was true of the retail price. However, buyer power reduced the average retail price, and consumer welfare improved.

Keywords: buyer power; retailer competition; waterbed effect; pricing strategy; national retailer; local retailer (search for similar items in EconPapers)
JEL-codes: Q Q0 Q2 Q3 Q5 Q56 O13 (search for similar items in EconPapers)
Date: 2019
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