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Complementarity and bargaining power

Timothy J Richards, Céline Bonnet and Zohra Mechemache ()

European Review of Agricultural Economics, 2018, vol. 45, issue 3, 297-331

Abstract: Bargaining power in vertical channels depends critically on the ‘disagreement profit’ or the opportunity cost to each player should negotiations fail. In a multiproduct context, disagreement profit depends on the degree of substitutability among the products offered by the downstream retailer. We develop an empirical framework that is able to estimate the effect of retail complementarity on bargaining power, and margins earned by manufacturers and retailers in the French soft-drink industry. We show that complementarity increases the strength of retailers’ bargaining position, so their share of the total margin increases by almost 28 per cent relative to the no-complementarity case.

Keywords: bargaining power; complementary goods; Nash-in-Nash equilibrium; retailing; soft drinks; vertical relationships (search for similar items in EconPapers)
Date: 2018
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Working Paper: Complementarity and Bargaining Power (2017) Downloads
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European Review of Agricultural Economics is currently edited by Christoph Weiss, Thomas Heckelei and Paolo Sckokai

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