Downstream Competition and the Effects of Buyer Power

Zhiqi Chen, Hong Ding (anding@deloitte.com.cn) and Zhiyang Liu (zhiyang163@163.com)
Additional contact information
Hong Ding: Deloitte Enterprise Consulting
Zhiyang Liu: Shanghai University of Finance and Economics

No 15-06, Carleton Economic Papers from Carleton University, Department of Economics

Abstract: To examine the interaction between buyer power and competition intensity in a downstream market, we consider four variations of a model in which oligopolistic retailers compete in the downstream market and one of them is a large retailer that has its own exclusive supplier. We demonstrate that an increase in the buyer power of the large retailer against its supplier leads to a fall in retail price and an improvement in consumer welfare, and this is true even in the extreme case where the large retailer is a monopoly in the downstream market. More interestingly, we find that the beneficial effects of an increase in buyer power are large when the intensity of downstream competition is low, with the effects being the largest in the case of downstream monopoly.

Keywords: buyer power; retail competition; antitrust policy (search for similar items in EconPapers)
JEL-codes: L1 L4 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2015-07-06
New Economics Papers: this item is included in nep-com and nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Published: Carleton Economic Papers

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Related works:
Journal Article: Downstream Competition and the Effects of Buyer Power (2016)
Working Paper: Downstream Competition and the Effects of Buyer Power (2013)
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