Buyer Power And The ‘Waterbed Effect’
AbstractWe present a simple model where the growth of one downstream firm generates lower wholesale prices for this firm but higher wholesale prices for its competitors (the âwaterbed effectâ). We derive conditions for when, even though firms compete in strategic complements, this harms consumers. This is more likely if larger firms already obtain substantial discounts compared to their smaller competitors. Furthermore, the identified âwaterbed effectâ holds irrespective of whether a firm grows by acquisition or âorganicallyâ by becoming more efficient.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal The Journal of Industrial Economics.
Volume (Year): 59 (2011)
Issue (Month): 1 (03)
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