Antitrust & Competition Policy Blog

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

Wednesday, April 23, 2014

Bargaining power in manufacturer-retailer relationships

Haucap, Justus; Heimeshoff, Ulrich; Klein, Gordon J.; Rickert, Dennis; and Wey, Christian discuss Bargaining power in manufacturer-retailer relationships.

ABSTRACT: Research on bargaining power in vertical relationships is scarce. It remains particularly unclear which factors drive bargaining power between the two negotiating parties in a vertical structure. We use a demand model where the consumer demand determines the total pie of industry profits. Moreover, we apply a bargaining concept on the supply side to analyze how profit is split between retailers and manufacturers. Estimates show that bargaining power can be explained by several decision variables for retailers and manufacturers. Options for both indicate that any analysis of bargaining power has to consider a dynamic view on the relevant parameters.

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