IDEAS home Printed from https://ideas.repec.org/p/bgu/wpaper/0512.html
   My bibliography  Save this paper

Buyer Countervailing Power: A Survey of Experimental Evidence

Author

Listed:
  • Bradley J. Ruffle

    (BGU)

Abstract

The rise of mega-retailers and industry concentration levels has recently generated an interest among economists and antitrust policymakers in the effects of buyer countervailing power. There exists a considerable theoretical literature offering a range of sources of powerful buyers’ ability to extract price discounts. The explanations that have been tested experimentally have all found laboratory support. This paper surveys the theoretical literature on countervailing power, emphasizing experimental tests where available. The increasing policy relevance of this topic and the blossoming of theoretical models contrasted with the dearth of experimental tests point to fruitful directions for research.

Suggested Citation

  • Bradley J. Ruffle, 2005. "Buyer Countervailing Power: A Survey of Experimental Evidence," Working Papers 0512, Ben-Gurion University of the Negev, Department of Economics.
  • Handle: RePEc:bgu:wpaper:0512
    as

    Download full text from publisher

    File URL: http://in.bgu.ac.il/en/humsos/Econ/Workingpapers/0512.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Richard J. Sexton & Terri A. Sexton, 1987. "Cooperatives as Entrants," RAND Journal of Economics, The RAND Corporation, vol. 18(4), pages 581-595, Winter.
    2. Jamie L. Brown-Kruse, 1991. "Contestability in the Presence of an Alternate Market: An Experimental Examination," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 136-147, Spring.
    3. Suchan Chae & Paul Heidhues, 2004. "Buyers' Alliances for Bargaining Power," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(4), pages 731-754, December.
    4. Davis, Douglas D. & Holt, Charles a., 1993. "Experimental economics: Methods, problems and promise," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 8(2), pages 179-212.
    5. Christopher M. Snyder, 1996. "A Dynamic Theory of Countervailing Power," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 747-769, Winter.
    6. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard H, 1986. "Fairness and the Assumptions of Economics," The Journal of Business, University of Chicago Press, vol. 59(4), pages 285-300, October.
    7. Frederic Pryor, 2001. "New Trends in U.S. Industrial Concentration," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 18(3), pages 301-326, May.
    8. Davis, Douglas D & Williams, Arlington W, 1991. "The Hayek Hypothesis in Experimental Auctions: Institutional Effects and Market Power," Economic Inquiry, Western Economic Association International, vol. 29(2), pages 261-274, April.
    9. Chen, Zhiqi, 2003. "Dominant Retailers and the Countervailing-Power Hypothesis," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 612-625, Winter.
    10. Rajeev K. Tyagi, 2001. "Why Do Suppliers Charge Larger Buyers Lower Prices?," Journal of Industrial Economics, Wiley Blackwell, vol. 49(1), pages 45-61, March.
    11. Schumacher, Ute, 1991. "Buyer Structure and Seller Performance in U.S. Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 73(2), pages 277-284, May.
    12. Lustgarten, Steven H, 1975. "The Impact of Buyer Concentration in Manufacturing Industries," The Review of Economics and Statistics, MIT Press, vol. 57(2), pages 125-132, May.
    13. Hans-Theo Normann & Bradley J. Ruffle & Christopher M. Snyder, 2007. "Do buyer-size discounts depend on the curvature of the surplus function? Experimental tests of bargaining models," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 747-767, September.
    14. Selten, Reinhard & Stoecker, Rolf, 1986. "End behavior in sequences of finite Prisoner's Dilemma supergames A learning theory approach," Journal of Economic Behavior & Organization, Elsevier, vol. 7(1), pages 47-70, March.
    15. Coursey, Don & Isaac, R Mark & Smith, Vernon L, 1984. "Natural Monopoly and Contested Markets: Some Experimental Results," Journal of Law and Economics, University of Chicago Press, vol. 27(1), pages 91-113, April.
    16. Katz, Michael L, 1987. "The Welfare Effects of Third-Degree Price Discrimination in," American Economic Review, American Economic Association, vol. 77(1), pages 154-167, March.
    17. Alexander Raskovich, 2003. "Pivotal Buyers and Bargaining Position," Journal of Industrial Economics, Wiley Blackwell, vol. 51(4), pages 405-426, December.
    18. Roman Inderst & Greg Shaffer, 2007. "Retail Mergers, Buyer Power and Product Variety," Economic Journal, Royal Economic Society, vol. 117(516), pages 45-67, January.
    19. Franciosi, Robert, et al, 1995. "Fairness: Effect on Temporary and Equilibrium Prices in Posted-Offer Markets," Economic Journal, Royal Economic Society, vol. 105(431), pages 938-950, July.
    20. Farber, Stephen C, 1981. "Buyer Market Structure and R&D Effort: A Simultaneous Equations Model," The Review of Economics and Statistics, MIT Press, vol. 63(3), pages 336-345, August.
    21. Cason, Timothy N. & Williams, Arlington W., 1990. "Competitive equilibrium convergence in a posted-offer market with extreme earnings inequities," Journal of Economic Behavior & Organization, Elsevier, vol. 14(3), pages 331-352, December.
    22. Kritikos, Alexander & Bolle, Friedel, 2004. "Punishment as a public good. When should monopolists care about a consumer boycott?," Journal of Economic Psychology, Elsevier, vol. 25(3), pages 355-372, June.
    23. Guth, Werner & Schmittberger, Rolf & Schwarze, Bernd, 1982. "An experimental analysis of ultimatum bargaining," Journal of Economic Behavior & Organization, Elsevier, vol. 3(4), pages 367-388, December.
    24. Jim Engle-Warnick & Bradley Ruffle, 2006. "The Strategies Behind Their Actions: A Method To Infer Repeated-Game Strategies And An Application To Buyer Behavior," Departmental Working Papers 2005-04, McGill University, Department of Economics.
    25. von Ungern-Sternberg, Thomas, 1996. "Countervailing power revisited," International Journal of Industrial Organization, Elsevier, vol. 14(4), pages 507-519, June.
    26. Jim Engle-Warnick & Bradley Ruffle, 2006. "Buyer Concentration As A Source Of Countervailing Power: Evidence From Experimental Posted-Offer Markets," Departmental Working Papers 2006-12, McGill University, Department of Economics.
    27. Bradley J. Ruffle, 2000. "Some factors affecting demand withholding in posted-offer markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(3), pages 529-544.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kai A. Konrad & Florian Morath & Wieland Müller, 2014. "Taxation and Market Power," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 47(1), pages 173-202, February.
    2. Bradley J. Ruffle, 2013. "When Do Large Buyers Pay Less? Experimental Evidence," Journal of Industrial Economics, Wiley Blackwell, vol. 61(1), pages 108-137, March.
    3. Lisa Bruttel, 2014. "Buyer power in large buyer groups?," TWI Research Paper Series 92, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    4. Jim Engle-Warnick & Bradley Ruffle, 2006. "The Strategies Behind Their Actions: A Method To Infer Repeated-Game Strategies And An Application To Buyer Behavior," Departmental Working Papers 2005-04, McGill University, Department of Economics.
    5. Jim Engle-Warnick & Bradley Ruffle, 2006. "Buyer Concentration As A Source Of Countervailing Power: Evidence From Experimental Posted-Offer Markets," Departmental Working Papers 2006-12, McGill University, Department of Economics.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Sara Fisher Ellison & Christopher M. Snyder, 2010. "Countervailing Power In Wholesale Pharmaceuticals," Journal of Industrial Economics, Wiley Blackwell, vol. 58(1), pages 32-53, March.
    2. Battigalli, Pierpaolo & Fumagalli, Chiara & Polo, Michele, 2007. "Buyer power and quality improvements," Research in Economics, Elsevier, vol. 61(2), pages 45-61, June.
    3. Hans-Theo Normann & Bradley J. Ruffle & Christopher M. Snyder, 2007. "Do buyer-size discounts depend on the curvature of the surplus function? Experimental tests of bargaining models," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 747-767, September.
    4. Jeon, Doh-Shin & Menicucci, Domenico, 2019. "On the unprofitability of buyer groups when sellers compete," Games and Economic Behavior, Elsevier, vol. 115(C), pages 265-288.
    5. Jim Engle-Warnick & Bradley Ruffle, 2006. "Buyer Concentration As A Source Of Countervailing Power: Evidence From Experimental Posted-Offer Markets," Departmental Working Papers 2006-12, McGill University, Department of Economics.
    6. Chiara Fumagalli & Massimo Motta, 2008. "Buyers' Miscoordination, Entry and Downstream Competition," Economic Journal, Royal Economic Society, vol. 118(531), pages 1196-1222, August.
    7. Jeon, Doh-Shin & Menicucci, Domenico, 2014. "Buyer Group and Buyer Power When Sellers Compete," TSE Working Papers 14-543, Toulouse School of Economics (TSE), revised Nov 2017.
    8. Chiara Fumagalli & Massimo Motta, 2008. "Buyers’ Miscoordination, Entry and Downstream Competition," Economic Journal, Royal Economic Society, vol. 118(531), pages 1196-1222, August.
    9. Johansen, Bjørn Olav, 2012. "The Buyer Power Of Multiproduct Retailers: Competition With One-Stop Shopping," Working Papers in Economics 03/12, University of Bergen, Department of Economics.
    10. Davis, Douglas D. & Wilson, Bart J., 2008. "Strategic buyers, horizontal mergers and synergies: An experimental investigation," International Journal of Industrial Organization, Elsevier, vol. 26(3), pages 643-661, May.
    11. Collins, Sean M. & James, Duncan & Servátka, Maroš & Vadovič, Radovan, 2020. "Attainment of Equilibrium: Marshallian Path Adjustment and Buyer Determinism," MPRA Paper 104103, University Library of Munich, Germany.
    12. Collins, Sean M. & James, Duncan & Servátka, Maroš & Vadovič, Radovan, 2021. "Attainment of equilibrium via Marshallian path adjustment: Queueing and buyer determinism," Games and Economic Behavior, Elsevier, vol. 125(C), pages 94-106.
    13. Qiu Zhao, 2019. "The Influence of Buyer Power on Supply Chain Pricing with Downstream Competition," Sustainability, MDPI, Open Access Journal, vol. 11(10), pages 1-19, May.
    14. Stéphane Caprice & Vanessa von Schlippenbach, 2008. "Competition policy in a concentrated and globalized retail industry," Post-Print hal-02656654, HAL.
    15. Inderst, Roman & Wey, Christian, 2007. "Buyer power and supplier incentives," European Economic Review, Elsevier, vol. 51(3), pages 647-667, April.
    16. Jim Engle-Warnick & Bradley Ruffle, 2002. "Buyer Countervailing Power versus Monopoly Power: Evidence from Experimental Posted-Offer Markets," Economics Papers 2002-W14, Economics Group, Nuffield College, University of Oxford.
    17. van Damme, E.E.C. & Larouche, P. & Müller, W., 2006. "Abuse of a Dominant Position : Cases and Experiments," Discussion Paper 2006-020, Tilburg University, Tilburg Law and Economic Center.
    18. Yuxin Chen & Xinxin Li, 2013. "Group Buying Commitment and Sellers’ Competitive Advantages," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 22(1), pages 164-183, March.
    19. Dana, James D., 2012. "Buyer groups as strategic commitments," Games and Economic Behavior, Elsevier, vol. 74(2), pages 470-485.
    20. Dasgupta Utteeyo, 2011. "Are Entry Threats Always Credible?," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 11(1), pages 1-41, December.

    More about this item

    Keywords

    buyer power; experimental economics; price discrimination; quantity discounts;
    All these keywords.

    JEL classification:

    • C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
    • C90 - Mathematical and Quantitative Methods - - Design of Experiments - - - General
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bgu:wpaper:0512. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/edbguil.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Aamer Abu-Qarn (email available below). General contact details of provider: https://edirc.repec.org/data/edbguil.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.