Countervailing Power And Dynamic Efficiency
This paper studies the impact of buyer power on dynamic efficiency. We consider a bargaining model in which buyer power arises endogenously from size and may impact on a supplier's incentives to invest in lower marginal cost. We challenge the view frequently expressed in policy circles that the exercise of buyer power stifles suppliers' incentives. Instead, we find that the presence of larger buyers keeps a supplier 'more on his toes' and induces him to improve the competitiveness of his offering, in terms of both price and quality, relative to buyers' alternative options.
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Volume (Year): 9 (2011)
Issue (Month): 4 (August)
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- Roman Inderst & Christian Wey, 2011.
"Countervailing Power And Dynamic Efficiency,"
Journal of the European Economic Association,
European Economic Association, vol. 9(4), pages 702-720, August.
- Inderst, Roman & Wey, Christian, 2010. "Countervailing power and dynamic efficiency," DICE Discussion Papers 01, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
- João VIEIRA-MONTEZ, 2004. "Downstream Concentration and Producer's Capacity Choice," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 04.13, Université de Lausanne, Faculté des HEC, DEEP.
- von Ungern-Sternberg, Thomas, 1996. "Countervailing power revisited," International Journal of Industrial Organization, Elsevier, vol. 14(4), pages 507-519, June. Full references (including those not matched with items on IDEAS)
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