Buyer power through the differentiation of suppliers

Claire Chambolle () and Sofia Villas-Boas
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Claire Chambolle: ALISS - Alimentation et sciences sociales - INRA - Institut National de la Recherche Agronomique, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper argues that rival retailers may choose to differentiate their supplying producers, even at the expense of downgrading the quality of the product offered to consumers, to improve their buyer power. We show that, through the differentiation of suppliers, a retailer may obtain a larger slice of a smaller pie, i.e, smaller bilateral joint profits. Thus, the "only" purpose of differentiation is to gain increasing buyer power. This result may hold (i) when retailers compete in the final market or (ii) when retailers are active in separate markets. The differentiation of suppliers, which results from a buyer power motive, may be harmful for consumer surplus and social welfare.

Date: 2015-09-12
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Citations: View citations in EconPapers (3)

Published in International Journal of Industrial Organization, 2015, 43, pp.56 - 65. ⟨10.1016/j.ijindorg.2015.09.002⟩

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Journal Article: Buyer power through the differentiation of suppliers (2015)
Working Paper: Buyer power through the differentiation of suppliers (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03283954

DOI: 10.1016/j.ijindorg.2015.09.002

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