Buyer Concentration As A Source Of Countervailing Power: Evidence From Experimental Posted-Offer Markets
AbstractWe experimentally examine the impact of buyer concentration on the pricing of a monopolist. In our experimental markets, a monopolist faces either two or four buyers. Markets with two buyers achieve significantly lower prices, sometimes below competitive levels, than those with four buyers. We design an additional pair of treatments to pinpoint the source of this difference. We attribute the lower pries in the two-buyer treatment to the monopolist pricing more cautiously when there are fewer buyers in order to avoid costly losses in sales. Buyer concentration may thus be an elective source of countervailing power.
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Bibliographic InfoPaper provided by McGill University, Department of Economics in its series Departmental Working Papers with number 2006-12.
Length: 31 pages
Date of creation: Sep 2006
Date of revision:
Find related papers by JEL classification:
- C91 - Mathematical and Quantitative Methods - - Design of Experiments - - - Laboratory, Individual Behavior
- D42 - Microeconomics - - Market Structure and Pricing - - - Monopoly
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-09-23 (All new papers)
- NEP-COM-2006-09-23 (Industrial Competition)
- NEP-EXP-2006-09-23 (Experimental Economics)
- NEP-MIC-2006-09-23 (Microeconomics)
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