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Buyer Power and Supplier Incentives

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  • Roman Inderst
  • Christian Wey

Abstract

This paper argues that - in contrast to an often expressed view - the formation of larger and more powerful buyers need not reduce welfare by stifling suppliers' incentives. If contracts are determined in bilateral negotiations, the presence of larger buyers may both increase suppliers' incentives for product improvement and induce suppliers to choose a more efficient technology. The paper also isolates two different channels by which larger buyers can obtain a discount.

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File URL: http://www.diw.de/documents/publikationen/73/diw_01.c.42834.de/dp464.pdf
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Bibliographic Info

Paper provided by DIW Berlin, German Institute for Economic Research in its series Discussion Papers of DIW Berlin with number 464.

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Length: 27 p.
Date of creation: 2005
Date of revision:
Handle: RePEc:diw:diwwpp:dp464

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Keywords: Buyer power; Merger; Retailing;

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