A study of buyer market: The role of consumer preference

Abstract

By introducing the consumer heterogeneous preference towards retailers, we consider the role of consumer preference on bargaining power. The results show that when consumer preference intensity is different, the retailer with strong consumer preference will be able to take advantage of this feature, and obtain a stronger negotiating capacity. The retailer's bargaining power is increasing with the consumer preference. In addition, this bargaining power can improve the consumer's utility as well as the social welfare, the wholesale price of intermediate goods have "waterbed effect". Our conclusions verify countervailing power hypothesis raised by Galbraith.