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Non Linear Contracting and Endogenous Buyer Power between Manufacturers and Retailers: Empirical Evidence on Food Retailing in France

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  • Bonnet, Céline
  • Dubois, Pierre

Abstract

We present the first empirical estimation of a structural model taking into account explicitly the endogenous buyer power of downstream players facing two part tariffs contracts offered by the upstream level. We consider vertical contracts between manufacturers and retailers where resale price maintenance may be used with two part tariffs and allow retailers to have some endogenous buyer power from the horizontal competition of manufacturers. Our contribution allows to recover price-cost margins at the upstream and downstream levels in these different structural models using the industry structure and estimates of demand parameters. We apply it to the market of bottled water in France, estimating a mixed logit demand model on individual level data. Empirical evidence shows that two part tari¤s contracts are used with no resale price maintenance and that the buyer power of supermarket chains is endogenous to the structure of manufacturers competition.

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Bibliographic Info

Paper provided by Toulouse School of Economics (TSE) in its series TSE Working Papers with number 10-189.

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Date of creation: Aug 2010
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Handle: RePEc:tse:wpaper:23205

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Cited by:
  1. Bonnet, Celine & Dubois, Pierre & Villas-Boas, Sofia B., 2009. "Empirical evidence on the role of non linear wholesale pricing and vertical restraints on cost pass-through," CUDARE Working Paper Series 1089, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
  2. Berardi, N. & Sevestre, P. & Tepaut, M. & Vigneron, A., 2012. "The impact of a `soda tax' on prices. Evidence from French micro data," Working papers 415, Banque de France.

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