Buyer Power and Vertical Mergers in Supply Chain Competition

Srishti Gupta ()
Additional contact information
Srishti Gupta: Institute of Economic Growth

Journal of Quantitative Economics, 2025, vol. 23, issue 2, No 6, 478 pages

Abstract: Abstract This paper examines how downstream firms’ buyer power influences market outcomes in upstream manufacturing markets and in downstream retail markets. In a competition between rival supply chains where upstream firms enter into a pair-wise exclusive relationships with their downstream retailers, we investigate how firms choose between a vertical merger regime and a downstream first-mover pricing regime. We analyse the three cases—no vertical merger; single-chain vertical merger; and double-chain vertical merger and conclude that upstream and downstream firms prefer vertical integration over downstream first-mover pricing only when products are more differentiated. For both single-chain and double-chain mergers, the elimination of double marginalization is pro-competitive when products are differentiated. Therefore, the antitrust authority can prevent such proposals of merger which occurs in industry where products are homogenous in nature as welfare is inevitably reduced in those cases. However, antitrust authorities can deny the welfare-decreasing mergers but sadly it cannot enforce welfare-improving ones.

Keywords: Buyer power; Bertrand duopoly; Downstream first mover pricing; Vertical integration (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s40953-024-00432-8 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jqecon:v:23:y:2025:i:2:d:10.1007_s40953-024-00432-8

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/40953

DOI: 10.1007/s40953-024-00432-8

Access Statistics for this article

Journal of Quantitative Economics is currently edited by Dilip Nachane and P.G. Babu

More articles in Journal of Quantitative Economics from Springer, The Indian Econometric Society (TIES) Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().