When Do Large Buyers Pay Less? Experimental Evidence
AbstractThe rise in mega-retailers has contributed to a growing literature on buyer power and large-buyer discounts. According to Rotemberg and Saloner (1986) and Snyder (1998), large buyers’ ability to obtain price discounts depends on their relative (rather than absolute) size and the degree of competition between suppliers. I test experimentally comparative statics implications of this theory concerning the number of sellers and the sizes of the buyers in the market. The results track the comparative statics predictions to a surprising extent. Subtle changes in the distribution of buyer sizes or the number of suppliers can create or negate large-buyer discounts. The results highlight the previously unexplored role of the demand structure in determining buyer-size discounts. Furthermore, the experiments establish the presence of small-buyer premia, not anticipated by the theory.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Ben-Gurion University of the Negev, Department of Economics in its series Working Papers with number 0910.
Length: 36 pages
Date of creation: 2009
Date of revision:
experimental economics; large-buyer discounts; buyer power; seller competition.;
Other versions of this item:
- Bradley J. Ruffle, 2013. "When Do Large Buyers Pay Less? Experimental Evidence," Journal of Industrial Economics, Wiley Blackwell, vol. 61(1), pages 108-137, 03.
- Ruffle, Bradley J., 2009. "When Do Large Buyers Pay Less? Experimental Evidence," MPRA Paper 16683, University Library of Munich, Germany.
- C92 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Group Behavior
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kandori, Michihiro, 1991. "Correlated Demand Shocks and Price Wars during Booms," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 171-80, January.
- Klaus Abbink & Jordi Brandts, 2005.
"Collusion in Growing and Shrinking Markets: Empirical Evidence from Experimental Duopolies,"
2005-03, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
- Klaus Abbink & Jordi Brandts, 2005. "Collusion in Growing and Shrinking Markets: Empirical Evidence from Experimental Duopolies," UFAE and IAE Working Papers 648.05, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
- Steffen Huck & Hans-Theo Normann & Jörg Oechssler, 2001.
"Two are Few and Four are Many: Number Effects in Experimental Oligopolies,"
Bonn Econ Discussion Papers
bgse12_2001, University of Bonn, Germany.
- Huck, Steffen & Normann, Hans-Theo & Oechssler, Jorg, 2004. "Two are few and four are many: number effects in experimental oligopolies," Journal of Economic Behavior & Organization, Elsevier, vol. 53(4), pages 435-446, April.
- John Haltiwanger & Joseph E. Harrington Jr., 1991. "The Impact of Cyclical Demand Movements on Collusive Behavior," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 89-106, Spring.
- Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
- Aoyagi, Masaki & Fréchette, Guillaume, 2009. "Collusion as public monitoring becomes noisy: Experimental evidence," Journal of Economic Theory, Elsevier, vol. 144(3), pages 1135-1165, May.
- Christopher M. Snyder, 1996. "A Dynamic Theory of Countervailing Power," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 747-769, Winter.
- Engle-Warnick, J. & Slonim, Robert L., 2006. "Learning to trust in indefinitely repeated games," Games and Economic Behavior, Elsevier, vol. 54(1), pages 95-114, January.
- Snyder, Christopher M., 1998. "Why do larger buyers pay lower prices? Intense supplier competition," Economics Letters, Elsevier, vol. 58(2), pages 205-209, February.
- Sara Fisher Ellison & Christopher M. Snyder, 2010. "COUNTERVAILING POWER IN WHOLESALE PHARMACEUTICALS -super-* ," Journal of Industrial Economics, Wiley Blackwell, vol. 58(1), pages 32-53, 03.
- repec:ebl:ecbull:v:3:y:2002:i:6:p:1-11 is not listed on IDEAS
- John A. List, 2009. "The Economics of Open Air Markets," NBER Working Papers 15420, National Bureau of Economic Research, Inc.
- Feinberg, Robert M & Husted, Thomas A, 1993. "An Experimental Test of Discount-Rate Effects on Collusive Behaviour in Duopoly Markets," Journal of Industrial Economics, Wiley Blackwell, vol. 41(2), pages 153-60, June.
- Robert Feinberg & Christopher Snyder, 2002. "Collusion with secret price cuts: an experimental investigation," Economics Bulletin, AccessEcon, vol. 3(6), pages 1-11.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Aamer Abu-Qarn).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.