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A Theoretical Model on the Influence in Chain Stores of Buyer Power

Author

Listed:
  • Chun-Hung Chen

    () (Department of Accounting, Chaoyang University of Technology, Taiwan)

  • Dachrahn Wu

    (Department of Economics, National Central University, Taiwan)

Abstract

This thesis introduces the "buyer power" model, probes into the influence on the chain relationship of the growth and decline of power between the headquarters and chain stores, and further overthrows the traditional literature's argument on the cause of exclusive dealing. First, this paper discovers that the unit remuneration demanded by a chain store from its headquarters is certainly in a reverse relationship with buyer power. Secondly, the effect of social welfare is dependent on the horizontal differentiation of the consumption aspect; while the horizontal differentiation is at a medium-low level, the market mechanism and social decision maker's preference regarding buyer power will be identical. Finally, this paper discovers that the crux of the problem is not in the concerned focus of the argument "market share", but rather below the two items are the real causes of exclusive dealing: (1) the compulsory contract between the headquarters and chain stores, and (2) the ratio of the headquarters' revenue to the chain store's fixed cost.

Suggested Citation

  • Chun-Hung Chen & Dachrahn Wu, 2012. "A Theoretical Model on the Influence in Chain Stores of Buyer Power," Journal of Economics and Management, College of Business, Feng Chia University, Taiwan, vol. 8(2), pages 283-310, July.
  • Handle: RePEc:jec:journl:v:8:y:2012:i:2:p:283-310
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    More about this item

    Keywords

    chain store; buyer power; exclusive dealing;

    JEL classification:

    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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