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Threat of Exit as a Source of Bargaining Power

Fabian Bergès and Claire Chambolle ()
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Fabian Bergès: Toulouse School of Economics (GREMAQ-UMR)

No 2009033, Discussion Papers (REL - Recherches Economiques de Louvain) from Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)

Abstract: This article analyzes a simple two period model where two homogenous manufacturers compete to supply a monopolist retailer. We show that if manufacturers are vulnerable (i.e if they are likely to exit the market in case of insufficient orders in the first period) they may exploit their threat of exit to capture the whole first period industry profit. Indeed, the retailer will accept to pay the high price to the manufacturers in order to secure upstream competition in the second period. Results are robust under different market structures or contract types.

Keywords: Bargaining power; market entry; vertical contract (search for similar items in EconPapers)
JEL-codes: D21 L14 Q12 (search for similar items in EconPapers)
Pages: 15
Date: 2009-09-01
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http://sites.uclouvain.be/econ/DP/REL/2009033.pdf (application/pdf)

Related works:
Journal Article: Threat of Exit as a Source of Bargaining Power (2009) Downloads
Working Paper: Threat of exit as a source of bargaining power (2009)
Working Paper: Threat of Exit as a Source of Bargaining Power (2007) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:ctl:louvre:2009033

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