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The Limits of Buyer Power: Experimental Evidence

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  • Bruttel, Lisa

Abstract

This paper studies the behavior of buyers confronting an incumbent monopolist and a potential market entrant in a repeated trade situation. In the experiment, buyers have two possibilities to demand lower prices in future trade periods. First, they can withhold demand. Second, they can voluntarily pay a higher price to the entrant in order to encourage future re-entry. Both these forms of buyer behavior occur in the experiment. They are less frequent when the number of buyers is large as opposed to small. A control treatment tests to what extent such behavior can be attributed to strategic motives.

Suggested Citation

  • Bruttel, Lisa, 2018. "The Limits of Buyer Power: Experimental Evidence," Review of Behavioral Economics, now publishers, vol. 5(2), pages 149-167, September.
    • Handle: RePEc:now:jnlrbe:105.00000082
    DOI: 10.1561/105.00000082
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    More about this item

    Keywords

    Buyer Power; Market Entry; Experiment;
    All these keywords.

    JEL classification:

    • C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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