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An Empirical Analysis of Countervailing Power in Business-to-Business Bargaining

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  • Walter Beckert

    (Birkbeck, University of London)

Abstract

Pricing schemes in business-to-business (B2B) relationships reflect price discrimination and bargaining over rents. Bargaining outcomes are determined by upstream market power and countervailing buyer power downstream. This paper uses a panel of B2B transactions in the UK brick market to study B2B transaction prices. The empirical analysis identifies three effects on prices: nonlinear volume and freight absorption effects; countervailing power effects that arise from buyers’ local commercial significance; and competition effects that are due to the buyers’ local potential suppliers. And it shows that small buyers benefit more from competition than do large buyers because they are not constrained by the suppliers’ capacity.

Suggested Citation

  • Walter Beckert, 2018. "An Empirical Analysis of Countervailing Power in Business-to-Business Bargaining," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(3), pages 369-402, May.
    • Handle: RePEc:kap:revind:v:52:y:2018:i:3:d:10.1007_s11151-017-9607-7
    DOI: 10.1007/s11151-017-9607-7
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    Cited by:

    1. Howard Smith & Walter Beckert & Yuya Takahashi, 2020. "Competition in a spatially-differentiated product market with negotiated prices," Economics Series Working Papers 921, University of Oxford, Department of Economics.
    2. Smith, Howard & Beckert, Walter & Takahashi, Yuya, 2020. "Competition in a spatially-differentiated product market with negotiated prices," CEPR Discussion Papers 15379, C.E.P.R. Discussion Papers.
    3. Haucap, Justus & Heimeshoff, Ulrich & Klein, Gordon J. & Rickert, Dennis & Wey, Christian, 2013. "Bargaining power in manufacturer-retailer relationships," DICE Discussion Papers 107, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

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    More about this item

    Keywords

    Countervailing power; Bargaining; Price discrimination; Transaction data;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory

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