Vertical Bargaining and Retail Competition

What Drives Countervailing Power

Bibliographic Data

ID9716035
AuthorsGermain Gaudin (0000-0003-3515-2306, European Commission, corresponding author)
Year2018
Volume128
Issue614
Pages2380-2413
Publication date2018-09-01
Peer ReviewedYes
Open AccessYes
TypeARTICLE
VenueThe Economic Journal (JOURNAL)
Journal identifiersISSN: 0013-0133 • E-ISSN: 1468-0297
PublisherOxford University Press (OUP) (PUBLISHER)
DOI10.1111/ecoj.12506
OpenAlexW3083606168
LanguageEN
Citations received1
References cited47

This paper investigates the effects of changes in retail market concentration when input prices are negotiated. Results are derived from a model of bilateral Nash-bargaining between upstream and downstream firms which allows for general forms of demand and retail competition. Whether countervailing buyer power arises, in the form of lower negotiated prices following greater concentration downstream, depends on the pass-through rate of input prices to retail prices. Countervailing buyer power arises in equilibrium for a broad class of demand forms, and its magnitude depends on the degree of product differentiation. However, it generally does not translate into lower retail prices because of heightened market power at the retail level. The demand systems commonly used in the literature impose strong restrictions on the results

Bargaining power · Bargaining problem · Business · Competition (biology · Cournot competition · Downstream (manufacturing · Economics · Industrial organization · Market power · Microeconomics · Monetary economics · Monopoly · Product (mathematics · Product differentiation · Upstream (networking · Digital Platforms and Economics · Economic theories and models · Merger and Competition Analysis

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