Downstream Competition and the Effects of Buyer Power

Zhiqi Chen and Hong Ding ()
Additional contact information
Hong Ding: Department of Economics, University of Ottawa, Ottawa, ON

No E1308E, Working Papers from University of Ottawa, Department of Economics

Abstract: To examine the interaction between buyer power and competition intensity in a downstream market, we construct a model in which oligopolistic retailers compete in quantity in the downstream market and one of them is a large retailer that has its own exclusive supplier. We demonstrate that an increase in the buyer power of the large retailer against its supplier leads to a fall in retail price and consequently an improvement in consumer surplus, and this is true even in the extreme case where the large retailer is a monopoly in the downstream market. More interestingly, we find that the beneficial effects of an increase in buyer power are large when the intensity of downstream competition is low, with the effects being the largest in the case of downstream monopoly. Our findings suggest that the traditional approach to merger reviews, under which an antitrust agency focuses primarily on maintaining competition in local retail markets, can work reasonably well even in a situation where the merger enhances the buyer power of the merged entity.

Keywords: Buyer power; downstream competition; antitrust policy. (search for similar items in EconPapers)
JEL-codes: L1 L4 L81 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2013
References: Add references at CitEc
Citations:

Downloads: (external link)
http://sciencessociales.uottawa.ca/economics/sites ... mics/files/1308e.pdf (application/pdf)
Our link check indicates that this URL is bad, the error code is: 502 Bad Gateway (http://sciencessociales.uottawa.ca/economics/sites/socialsciences.uottawa.ca.economics/files/1308e.pdf [301 Moved Permanently]--> https://sciencessociales.uottawa.ca/economics/sites/socialsciences.uottawa.ca.economics/files/1308e.pdf)

Related works:
Journal Article: Downstream Competition and the Effects of Buyer Power (2016)
Working Paper: Downstream Competition and the Effects of Buyer Power (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ott:wpaper:e1308e

Access Statistics for this paper

More papers in Working Papers from University of Ottawa, Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Aggey Semenov ().