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Pivotal Buyers and Bargaining Position

  • Alexander Raskovich
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    Securing sales to a large buyer can be pivotal to a supplier's decision to produce. While conventional wisdom suggests that being pivotal improves a buyer's bargaining position, the opposite is shown in a multilateral bargaining model. If other buyers' payments fall short of costs, a pivotal buyer must cover the shortfall or forfeit consumption. This affords leverage that the supplier lacks when bargaining with non-pivotal buyers. The analysis illuminates contracting in markets with high fixed costs, such as cable television programming, motion pictures, and large-scale project finance, and has implications for the FCC's horizontal ownership limits on cable system operators. Copyright Blackwell Publishing Ltd. 2003.

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    Article provided by Wiley Blackwell in its journal The Journal of Industrial Economics.

    Volume (Year): 51 (2003)
    Issue (Month): 4 (December)
    Pages: 405-426

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    Handle: RePEc:bla:jindec:v:51:y:2003:i:4:p:405-426
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