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The Buyer Power Of Multiproduct Retailers: Competition With One-Stop Shopping

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  • Johansen, Bjørn Olav

    ()
    (University of Bergen, Norway)

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    Abstract

    This paper illustrates how, in local retail markets, a multiproduct retailer may gain buyer power when some consumers are one-stop shoppers (multi-product shop-pers). We consider a model where independent suppliers negotiate terms of trade with a large multiproduct retailer and a group of smaller single product retailers, respectively. We find that an increase in the share of one-stop shoppers intensifies the degree of competition between the retailers, and hence reduces the overall industry profit –while at the same time enabling the multiproduct retailer to obtain discounts from its suppliers, in the form of lower fixed fees. We also show that the presence of a large retailer may positively affect the suppliers’incentives to invest in product quality or cost reductions.

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    File URL: https://www.uib.no/filearchive/wp.03.12.pdf
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    Bibliographic Info

    Paper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 03/12.

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    Length: 152 pages
    Date of creation: 01 Feb 2012
    Date of revision:
    Handle: RePEc:hhs:bergec:2012_003

    Contact details of provider:
    Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
    Phone: (+47)55589200
    Fax: (+47)55589210
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    Web page: http://www.uib.no/econ/en
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    Related research

    Keywords: one-stop shopping; buyer power; dynamic effi- ciency; public policy ;

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    References

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    1. Suchan Chae & Paul Heidhues, 2004. "Buyers' Alliances for Bargaining Power," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(4), pages 731-754, December.
    2. Zhiqi Chen, 2004. "Countervailing Power and Product Diversity," Econometric Society 2004 North American Winter Meetings 279, Econometric Society.
    3. Rey, Patrick & Chen, Zhijun, 2010. "Loss Leading as an Exploitative Practice," IDEI Working Papers 658, Institut d'Économie Industrielle (IDEI), Toulouse, revised Dec 2011.
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    5. Battigalli, Pierpaulo & Fumagalli, Chiara & Polo, Michele, 2006. "Buyer Power and Quality Improvements," CEPR Discussion Papers 5814, C.E.P.R. Discussion Papers.
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    8. Tasneem Chipty & Christopher M. Snyder, 1999. "The Role Of Firm Size In Bilateral Bargaining: A Study Of The Cable Television Industry," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 326-340, May.
    9. Inderst, Roman & Shaffer, Greg, 2004. "Retail Mergers: Buyer Power and Product Variety," CEPR Discussion Papers 4236, C.E.P.R. Discussion Papers.
    10. Zhiqi Chen, 2001. "Dominant Retailers and the Countervailing Power Hypothesis," Carleton Economic Papers 01-05, Carleton University, Department of Economics, revised 2003.
    11. Inderst, Roman & Wey, Christian, 2002. "Buyer Power and Supplier Incentives," CEPR Discussion Papers 3547, C.E.P.R. Discussion Papers.
    12. Inderst, Roman & Wey, Christian, 2003. " Bargaining, Mergers, and Technology Choice in Bilaterally Oligopolistic Industries," RAND Journal of Economics, The RAND Corporation, vol. 34(1), pages 1-19, Spring.
    13. Rajiv Lal & Carmen Matutes, 1989. "Price Competition in Multimarket Duopolies," RAND Journal of Economics, The RAND Corporation, vol. 20(4), pages 516-537, Winter.
    14. von Schlippenbach, Vanessa & Wey, Christian, 2011. "One-stop shopping behavior, buyer power, and upstream merger incentives," DICE Discussion Papers 27, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    15. Inderst, Roman & Wey, Christian, 2010. "Countervailing power and dynamic efficiency," DICE Discussion Papers 01, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    16. Lal, Rajiv & Matutes, Carmen, 1994. "Retail Pricing and Advertising Strategies," The Journal of Business, University of Chicago Press, vol. 67(3), pages 345-70, July.
    17. Horn, Henrik & Wolinsky, Asher, 1988. "Worker Substitutability and Patterns of Unionisation," Economic Journal, Royal Economic Society, vol. 98(391), pages 484-97, June.
    18. Bliss, Christopher, 1988. "A Theory of Retail Pricing," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 375-91, June.
    19. Alexander Raskovich, 2003. "Pivotal Buyers and Bargaining Position," Journal of Industrial Economics, Wiley Blackwell, vol. 51(4), pages 405-426, December.
    20. Dobson, Paul W & Waterson, Michael, 1997. "Countervailing Power and Consumer Prices," Economic Journal, Royal Economic Society, vol. 107(441), pages 418-30, March.
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