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Supplier Innovation In The Presence Of Buyer Power

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  • Zhiqi Chen

Abstract

This article analyzes the impact of retailer buyer power on a supplier's incentive to conduct innovation, with a focus on the supplier's investment in product variety and quality improvement. The analysis shows that an increase in buyer power, manifested through either a weakening of the supplier's bargaining position or a strengthening of a large retailer's bargaining power, leads to greater product variety and higher quality if the elasticity of demand is not too large. Increased buyer power, manifested through a strengthening of a large retailer's bargaining position, stimulates the supplier to invest more in quality improvement.

Suggested Citation

  • Zhiqi Chen, 2019. "Supplier Innovation In The Presence Of Buyer Power," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(1), pages 329-353, February.
    • Handle: RePEc:wly:iecrev:v:60:y:2019:i:1:p:329-353
    DOI: 10.1111/iere.12355
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    Cited by:

    1. Aditya Bhattacharjea & Srishti Gupta, 2022. "Alternative Forms of Buyer Power in a Vertical Duopoly: Implications for profits and consumer welfare," Working papers 326, Centre for Development Economics, Delhi School of Economics.
    2. Junguo Shi & Bert M. Sadowski & Xinru Zeng & Shanshan Dou & Jie Xiong & Qiuya Song & Sihan Li, 2023. "Picking winners in strategic emerging industries using government subsidies in China: the role of market power," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-8, December.
    3. Zhiqi Chen & Hong Ding & Zhiyang Liu, 2016. "Downstream Competition and the Effects of Buyer Power," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 49(1), pages 1-23, August.
    4. Hendrik Döpper & Geza Sapi & Christian Wey, 2024. "A bargaining perspective on vertical integration," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 57(1), pages 199-224, February.
    5. Claire Chambolle & Clémence Christin, 2017. "New Product Introduction and Slotting Fees," Working Papers hal-01458949, HAL.
    6. Hugo Molina, 2024. "Buyer Alliances in Vertically Related Markets," Working Papers hal-03340176, HAL.
    7. Claire Chambolle & Clémence Christin, 2021. "New Product Introduction and Slotting Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 69(2), pages 410-442, June.

    More about this item

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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