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Buyer power in the cement industry

Fridrik Baldursson () and Sigurdur Johannesson

MPRA Paper from University Library of Munich, Germany

Abstract: The Icelandic Competition Council recently ruled that a cement supplier with 75% market share is not dominant. The ruling was based on countervailing power of local concrete producers. To test the economic arguments for the ruling, we present a simplified bilateral oligopoly model of the in¬dustry where a new supplier enters a market competing with an incumbent. We show that it may be rational for buyers, given that some buying firms have switched to an entrant, to stay with a less efficient incumbent. Contracts negotiated with the incumbent are not as advantageous as those the entrant offers, but better than those that would prevail in monopoly of the entrant. This supports the aforementioned ruling.

Keywords: Bilateral Oligopoly; Countervailing Power; Cement Industry (search for similar items in EconPapers)
JEL-codes: D43 L13 (search for similar items in EconPapers)
Date: 2005
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https://mpra.ub.uni-muenchen.de/14748/1/MPRA_paper_14748.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:14742

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