Friday, September 9, 2011
Posted by D. Daniel Sokol
Vanessa von Schlippenbach and Christian Wey (University of Dusseldorf) explain One-stop shopping behavior, buyer power, and upstream merger incentives.
ABSTRACT: We analyze how consumer preferences for one-stop shopping affect the bargaining relationship between a retailer and its suppliers. One-stop shopping preferences create demand complementarities among otherwise independent products which lead to two opposing effects on upstream merger incentives: first a standard double mark-up problem and second a bargaining effect. The former creates merger incentives while the later induce suppliers to bargain separately. When buyer power becomes large enough, then suppliers stay separated which raises final good prices. Such an outcome is more likely when one-stop shopping is pronounced.