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Non Linear Contracting and Endogenous Buyer Power between Manufacturers and Retailers: Empirical Evidence on Food Retailing in France


  • Bonnet, Céline
  • Dubois, Pierre


We present the first empirical estimation of a structural model taking into account explicitly the endogenous buyer power of downstream players facing two part tariffs contracts offered by the upstream level. We consider vertical contracts between manufacturers and retailers where resale price maintenance may be used with two part tariffs and allow retailers to have some endogenous buyer power from the horizontal competition of manufacturers. Our contribution allows to recover price-cost margins at the upstream and downstream levels in these different structural models using the industry structure and estimates of demand parameters. We apply it to the market of bottled water in France, estimating a mixed logit demand model on individual level data. Empirical evidence shows that two part tariffs contracts are used with no resale price maintenance and that the buyer power of supermarket chains is endogenous to the structure of manufacturers competition.

Suggested Citation

  • Bonnet, Céline & Dubois, Pierre, 2010. "Non Linear Contracting and Endogenous Buyer Power between Manufacturers and Retailers: Empirical Evidence on Food Retailing in France," CEPR Discussion Papers 8029, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:8029

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    References listed on IDEAS

    1. Scott, Hal S. (ed.), 2005. "Capital Adequacy beyond Basel: Banking, Securities, and Insurance," OUP Catalogue, Oxford University Press, number 9780195169713.
    2. Hillion, Pierre & Vermaelen, Theo, 2004. "Death spiral convertibles," Journal of Financial Economics, Elsevier, vol. 71(2), pages 381-415, February.
    3. Alon Raviv, 2004. "Bank Stability and Market Discipline: Debt-for-Equity Swap versus Subordinated Notes," Finance 0408003, EconWPA.
    4. Darrell Duffie, 2010. "A Contractual Approach to Restructuring Financial Institutions," Book Chapters,in: Kenneth E. Scott & George P. Shultz & John B. Taylor (ed.), Ending Government Bailouts As We Know Them, chapter 6 Hoover Institution, Stanford University.
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    Cited by:

    1. repec:taf:applec:v:48:y:2016:i:41:p:3976-3994 is not listed on IDEAS
    2. Nicoletta Berardi & Patrick Sevestre & Marine Tépaut & Alexandre Vigneron, 2016. "The impact of a ‘soda tax’ on prices: evidence from French micro data," Applied Economics, Taylor & Francis Journals, vol. 48(41), pages 3976-3994, September.
    3. Haucap, Justus & Heimeshoff, Ulrich & Klein, Gordon J. & Rickert, Dennis & Wey, Christian, 2013. "Inter-format competition among retailers: The role of private label products in market delineation," DICE Discussion Papers 101, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    4. Villas-Boas, Sofia B & Bonnet, Celine, 2016. "Asymmetric Consumer Price Responses and Asymmetric Cost Pass-Through," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt172676f9, Department of Agricultural & Resource Economics, UC Berkeley.
    5. Celine Bonnet & Pierre Dubois & Sofia B. Villas Boas & Daniel Klapper, 2013. "Empirical Evidence on the Role of Nonlinear Wholesale Pricing and Vertical Restraints on Cost Pass-Through," The Review of Economics and Statistics, MIT Press, vol. 95(2), pages 500-515, May.
    6. Cuiabano, Simone, 2017. "Competition Policy Evaluation through Damage Estimation in Fuel Retail Cartel," TSE Working Papers 17-847, Toulouse School of Economics (TSE).
    7. Haucap, Justus & Heimeshoff, Ulrich & Klein, Gordon J. & Rickert, Dennis & Wey, Christian, 2013. "Bargaining power in manufacturer-retailer relationships," DICE Discussion Papers 107, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

    More about this item


    competition; differentiated products; double marginalization; endogenous buyer power; manufacturers; mixed logit; non nested tests; retailers; two part tariffs; vertical contracts; water;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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