Tuesday, February 23, 2016

Buyer Power from Joint Listing Decision

Stephane Caprice, University of Toulouse 1 - Toulouse School of Economics (TSE) and Rey Patrick, Toulouse School of Economics; Centre for Economic Policy Research (CEPR) explore Buyer Power from Joint Listing Decision.

ABSTRACT: We consider a model of vertically related markets, in which an upstream firm faces a competitive fringe of less efficient suppliers and negotiates with customers that compete in a downstream market. We allow downstream firms to form a buyer group which selects suppliers on behalf of its members. We show that transforming individual listing decisions into a joint listing decision makes delisting less harmful for a group member, which in turn enhances the group members’ bargaining position at the expense of the upstream firm. We also discuss the implication for upstream investment incentives.


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