Buyer Power and the 'Waterbed Effect'

Inderst, Roman; Valletti, Tommaso

doi:10.2139/ssrn.1113318

Cited by 18 publications

(27 citation statements)

References 20 publications

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“…In the study of Chen (2003), an increasing in the bargaining power of the dominant retailer reduces the supplier's share of joint profit, and then the supplier raises the quantity sold by fringe retailer by lowering the wholesale price it charges the fringe retailer. Our conclusion is similar to Inderst (2007) [24] and Inderst & Valletti (2011) [25] . Inderst (2007) [24] considered the market study the effect of bargaining power with homogeneous products based on the outside option, and forward the existence of the "waterbed effect".…”

Section: Fig1 Comparing Of Supplier's Profits In Separation Decisionsupporting

confidence: 89%

A study of buyer market: The role of consumer preference

Hui-qing

Zhi-hui

2013

2013 International Conference on Management Science and Engineering 20th Annual Conference Proceedings

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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.

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Section: Fig1 Comparing Of Supplier's Profits In Separation Decisionsupporting

confidence: 89%

A study of buyer market: The role of consumer preference

Hui-qing

Zhi-hui

2013

2013 International Conference on Management Science and Engineering 20th Annual Conference Proceedings

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“…Second, we have assumed that the supplier and the retailer negotiate over a linear wholesale price w. In so doing, we are following the common approach in many existing models, such as von Ungern-Sternberg (1996), Dobson and Waterson (1997), and Inderst and Valletti (2011). In reality, contracts between retailers and suppliers are often more complex.…”

Section: A Model Of Homogeneous Retailersmentioning

confidence: 99%

“…In the literature, it has been shown that a larger size confers more buyer power to a retailer because it improves the retailer's outside option, strengthens its bargaining power or bargaining position, or weakens the supplier's bargaining position (Katz 1987;Inderst and Valletti 2011;Inderst and Wey 2011;Chen 2014). The generic bargaining function could be applicable to these different mechanisms.…”

Section: Generic Bargaining Functionmentioning

confidence: 99%

“…12 In the literature, a number of authors have examined the sources of buyer power. They include Katz (1987), Chipty and Snyder (1999), Montez (2007), Wey (2007, 2011), Inderst and Valletti (2011), and Chen (2014). Among them, Montez (2007) poses the question, ''Why bake a larger pie when getting a smaller slice?''…”

Section: Generalized Nash Bargaining With a Linear Demand Functionmentioning

confidence: 99%

“…1 This has led to a growing literature that analyzes the effects of buyer power on consumer prices and social welfare. They include von Ungern-Sternberg (1996), Dobson and Waterson (1997), Chen (2003), Erutku (2005), Mills (2010), and Inderst and Valletti (2011). 2 As will be discussed in Sect.…”

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Downstream Competition and the Effects of Buyer Power

Chen

Ding²,

Liu

2016

Rev Ind Organ

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We examine four variations of a model in which oligopolistic retailers compete in a 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 vis-à-vis its supplier leads to a fall in the retail price and an improvement in consumer welfare. 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.

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Profitability and profit persistence in EU food retailing: Differences between top competitors and fringe firms

2020

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We investigate the drivers and persistence of profits in EU food retailing by focusing on differences between “top competitors” and fringe food retailers using a sample of 12,786 firms from France, Spain, and Sweden between 2006 and 2014. We detect a high degree of profit persistence in food retailing, presumably caused by strong bargaining power towards processors. Moreover, we find that profit persistence is higher for “top competitors” such as members of Top‐5 chains regarding sales and that independent/specialized supermarkets generate lower profitability. The results provide insights regarding power imbalances in food retailing and thus support the development of managerial strategies as well as measures to enhance market efficiency.

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Buyer Power and the 'Waterbed Effect'

Cited by 18 publications

References 20 publications

A study of buyer market: The role of consumer preference

A study of buyer market: The role of consumer preference

Downstream Competition and the Effects of Buyer Power

Profitability and profit persistence in EU food retailing: Differences between top competitors and fringe firms

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