Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Friday, June 15, 2012

Buyer power from joint listing decision

Posted by D. Daniel Sokol

Stephane Caprice (Toulouse) and Patrick Rey (Toulouse) analyze Buyer power from joint listing decision.

ABSTRACT: We show that collective bargaining can enhance retailers’ buying power vis-a-vis their suppliers. We consider a model of vertically related markets, in which an upstream leader faces a competitive fringe of less efficient suppliers and negotiates secretly with several firms that compete in a downstream market. We allow downstream firms to join forces in negotiating with suppliers, by creating a buyer group which selects suppliers on behalf of its members: each group member can then veto the upstream leader’s offer, in which case all group members turn to the fringe suppliers. Transforming individual listing decisions into a joint listing decision makes delisting less harmful for a group member; this, in turn enhances the group members’ bargaining position at the expense of the upstream leader. We also show that this additional buyer power can have an ambiguous impact on the upstream leader’s incentives to invest.

http://lawprofessors.typepad.com/antitrustprof_blog/2012/06/buyer-power-from-joint-listing-decision.html

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