Overbuying, demand withholding, and single sourcing under decreasing returns

Christophe Bernard and Sébastien Mitraille ()
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Christophe Bernard: TBS - Toulouse Business School
Sébastien Mitraille: IMT-BS - MMS - Département Management, Marketing et Stratégie - TEM - Télécom Ecole de Management - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris], LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris]

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Abstract: Consider suppliers whose comparative advantages, which are unknown to a buyer, depend on the quantity procured. The distortions of the buyer purchase policy differs depending on the market characteristics. In a large market, either it overbuys to suppliers with steep marginal costs, who are better at producing a small volume; or it withholds the demand it addresses to suppliers with flatter marginal costs, who are better at producing a large volume. The latter policy is implemented through a concave tariff offered to the less capacity constrained suppliers. In a small market, demand withholding prevails and some suppliers can be excluded.

Keywords: Quadratic tariffs; Overbuying; Demand withholding; Countervailing incentives (search for similar items in EconPapers)
Date: 2026
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Published in Journal of Industrial Economics, In press, pp.1-17. ⟨10.1111/joie.70021⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05529271

DOI: 10.1111/joie.70021

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