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The Countervailing Power Hypothesis when Dominant Retailers Function as Sales Promoters

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  • Noriaki Matsushima
  • Shohei Yoshida

Abstract

We consider a downstream oligopoly model with one dominant and several fringe retailers who purchase a manufacturing product from a monopoly supplier. We then examine how the supplier's disagreement payoff influences the relation between the dominant retailer's bargaining power and the equilibrium retail price. If the market demand shrinks due to a breakdown in bargaining between the supplier and the dominant retailer, who works as a sales promoter for the product, there is a negative relation between the bargaining power and the retail price. We also find that an increase in the number of fringe retailers is more likely to increase the retail price if their number is large.

Suggested Citation

  • Noriaki Matsushima & Shohei Yoshida, 2018. "The Countervailing Power Hypothesis when Dominant Retailers Function as Sales Promoters," Manchester School, University of Manchester, vol. 86(5), pages 665-680, September.
    • Handle: RePEc:bla:manchs:v:86:y:2018:i:5:p:665-680
    DOI: 10.1111/manc.12221
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    Cited by:

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    2. Yuta Kittaka & Noriaki Matsushima & Fuyuki Saruta, 2021. "Competition between physical and electronic content retailers," ISER Discussion Paper 1123, Institute of Social and Economic Research, Osaka University.
    3. Noriaki Matsushima & Shohei Yoshida, 2022. "The countervailing power hypothesis and contingent contracts," ISER Discussion Paper 1191, Institute of Social and Economic Research, Osaka University.
    4. Qiu Zhao, 2019. "The Influence of Buyer Power on Supply Chain Pricing with Downstream Competition," Sustainability, MDPI, vol. 11(10), pages 1-19, May.
    5. Shohei Yoshida, 2018. "Bargaining power and firm profits in asymmetric duopoly: an inverted-U relationship," Journal of Economics, Springer, vol. 124(2), pages 139-158, June.

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