BUYER CONCENTRATION AS A SOURCE OF COUNTERVAILING POWER: EVIDENCE FROM EXPERIMENTAL POSTED-OFFER MARKETS

Jim Engle-Warnick () and Bradley Ruffle

Departmental Working Papers from McGill University, Department of Economics

Abstract: We experimentally examine the impact of buyer concentration on the pricing of a monopolist. In our experimental markets, a monopolist faces either two or four buyers. Markets with two buyers achieve significantly lower prices, sometimes below competitive levels, than those with four buyers. We design an additional pair of treatments to pinpoint the source of this difference. We attribute the lower pries in the two-buyer treatment to the monopolist pricing more cautiously when there are fewer buyers in order to avoid costly losses in sales. Buyer concentration may thus be an elective source of countervailing power.

JEL-codes: C91 D42 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2006-09
New Economics Papers: this item is included in nep-com, nep-exp and nep-mic
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Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:mcl:mclwop:2006-12

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