Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/118683
Authors: 
Gaudin, Germain
Year of Publication: 
2015
Series/Report no.: 
DICE Discussion Paper 195
Abstract: 
This paper investigates the effects of mergers, entry, and exit in retail markets when input prices are negotiated. Results are derived from a model of bilateral Nash-bargaining between manufacturers and retailers which allows for general forms of demand and retail competition. Whether countervailing buyer power arises, in the form of lower negotiated prices following greater retail concentration, depends on the pass-through rate of input to retail prices. Countervailing buyer power arises in equilibrium for a broad class of demand forms, and its magnitude depends on the degree of product differentiation. However, it generally does not translate into lower retail prices because of heightened market power at the retail level. Finally, the linear demand systems commonly used in the literature impose strong restrictions on the results.
Subjects: 
Countervailing buyer power
Bilateral negotiations
Vertical relations
Nash-bargaining
Pass-through rate
Market concentration
Retail mergers
Entry
Exit
JEL: 
C78
D43
L13
L14
L81
ISBN: 
978-3-86304-194-6
Document Type: 
Working Paper

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