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Threat of exit as a source of bargaining power

Risque de faillite et pouvoir de marché

Fabian Berges () and Claire Chambolle ()
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Fabian Berges: Groupe de recherche en économie mathématique et quantitative - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique

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Abstract: This article analyzes a simple two-period model where two homogenous manufacturers compete to supply a monopolist retailer. The authors 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: ENTREE SUR LE MARCHE; BARGAINING POWER; MARKET ENTRY; POUVOIR DE NEGOCIATION; RELATIONS VERTICALES; VERTICAL CONTRACT (search for similar items in EconPapers)
Date: 2009
Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-02654192
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Published in Recherches Economiques de Louvain - Louvain economic review, De Boeck Université, 2009, 75 (3), pp.353-368. ⟨10.3917/rel.753.0353⟩

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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) Downloads
Working Paper: Threat of Exit as a Source of Bargaining Power (2007) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-02654192

DOI: 10.3917/rel.753.0353

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