Multimarket linkages, buyer power, and the productivity puzzle
AbstractThis paper examines the relationship between firms' productivity improvement and the volume of exports, and shows that it can be sometimes negative. Specifically, we simultaneously take into account intermediate retailers (i.e., vertically) and multimarket linkages (i.e., horizontally). We find that an improvement of the manufacturing productivity affects the bargained wholesale prices in opposite directions in asymmetric markets, causing retailers to make corresponding changes that look surprising. This result can explain for the empirical "left productivity puzzle" found in Ghemawat et al. (2010). Related to this issue is the relationship between buyer power (caused by a retail merger) and profitability. Contrary to the existing literature, in an extended setup, we find that the merger between the downstream duopolists does not improve their profits if their bargaining power is strong vs. upstream suppliers.
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Bibliographic InfoPaper provided by Institute of Social and Economic Research, Osaka University in its series ISER Discussion Paper with number 0797.
Date of creation: Oct 2010
Date of revision:
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-10-23 (All new papers)
- NEP-BEC-2010-10-23 (Business Economics)
- NEP-COM-2010-10-23 (Industrial Competition)
- NEP-EFF-2010-10-23 (Efficiency & Productivity)
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