Purchasing Alliances and Product Variety

Marie-Laure Allain, Rémi Avignon () and Claire Chambolle ()
Additional contact information
Rémi Avignon: CREST, Institut Polytechnique de Paris

No 2020-13, Working Papers from Center for Research in Economics and Statistics

Abstract: We analyze the impact of purchasing alliances on product variety and profit sharing in a setting, in which capacity constrained retailers operate in separated markets and select their assortment in a set of differentiated products offered by heterogeneous suppliers (multinationals vs. local SMEs). Retailers may either have independent listing strategies or build a buying group, thereby committing to a joint listing strategy. This alliance may cover the whole product line (full buying group) or only the products of large suppliers (partial buying group). We show that a buying group may enhance the retailers’ buyer power and reduce the overall product variety to the detriment of consumers. Our most striking result is that partial buying groups do not protect the small suppliers from being excluded or from bearing profit losses; they may even be more profitable for retailers than full buying groups.

Keywords: Vertical relations; buying group; purchasing alliance; buyer power; vertical foreclosure. (search for similar items in EconPapers)
JEL-codes: L13 L42 L81 (search for similar items in EconPapers)
Pages: 65 pages
Date: 2020-06-12
New Economics Papers: this item is included in nep-com and nep-ind
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Citations: View citations in EconPapers (9)

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Related works:
Journal Article: Purchasing alliances and product variety (2020)
Working Paper: Purchasing alliances and product variety (2020)
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