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Supplier Innovation in the Presence of Buyer Power

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Abstract

A theoretical framework is constructed to derive general conditions under which increased buyer power weakens or strengthens a supplier’s incentive to innovate. These conditions are then applied to two sets of specific models: one on product innovation and the other on process innovation. The analysis shows that the effects of buyer power depend on the type of innovation, the source of buyer power, and the channel through which buyer power manifests itself. It identifies circumstances under which an increase in buyer power has a negative, positive or zero impact on innovation. The welfare consequences of buyer power are also investigated.

Suggested Citation

  • Zhiqi Chen, 2014. "Supplier Innovation in the Presence of Buyer Power," Carleton Economic Papers 14-03, Carleton University, Department of Economics.
    • Handle: RePEc:car:carecp:14-03
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    Cited by:

    1. Aditya Bhattacharjea & Srishti Gupta, 2022. "Alternative Forms of Buyer Power in a Vertical Duopoly: Implications for profits and consumer welfare," Working papers 326, Centre for Development Economics, Delhi School of Economics.
    2. Zhiqi Chen & Hong Ding & Zhiyang Liu, 2016. "Downstream Competition and the Effects of Buyer Power," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(1), pages 1-23, August.
    3. Hendrik Döpper & Geza Sapi & Christian Wey, 2024. "A bargaining perspective on vertical integration," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(1), pages 199-224, February.
    4. Claire Chambolle & Clémence Christin, 2017. "New Product Introduction and Slotting Fees," Working Papers hal-01458949, HAL.
    5. Claire Chambolle & Clémence Christin, 2021. "New Product Introduction and Slotting Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 69(2), pages 410-442, June.
    6. Junguo Shi & Bert M. Sadowski & Xinru Zeng & Shanshan Dou & Jie Xiong & Qiuya Song & Sihan Li, 2023. "Picking winners in strategic emerging industries using government subsidies in China: the role of market power," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-8, December.
    7. Hugo Molina, 2024. "Buyer Alliances in Vertically Related Markets," Working Papers hal-03340176, HAL.

    More about this item

    Keywords

    Buyer power; innovation; product variety;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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