Buyer Power and Supplier Incentives

Christian Wey and Roman Inderst

No 3547, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This Paper investigates how the formation of larger buyers affects a supplier's profits and, by doing so, his incentives to undertake non-contractible activities. We first identify two channels of buyer power, which allows larger buyers to obtain discounts. We subsequently examine the effects of buyer power on the supplier's incentives and social welfare. Contrary to some informal claims in the policy debate on buyer power, we find that the exercise of buyer power -even though reducing supplier's profits- may often increase a supplier's incentive to undertake welfare enhancing activities.

Keywords: Buyer power; Retailing; Mergers (search for similar items in EconPapers)
JEL-codes: C78 D43 L13 (search for similar items in EconPapers)
Date: 2002-09
New Economics Papers: this item is included in nep-ind
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (12)

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Related works:
Journal Article: Buyer power and supplier incentives (2007)
Working Paper: Buyer Power and Supplier Incentives (2005)
Working Paper: Buyer Power and Supplier Incentives (2003)
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