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Purchasing Alliances and Product Variety

Author

Listed:
  • Marie-Laure ALLAIN

    (CREST, CNRS, Ecole Polytechnique, Institut Polytechnique de Paris)

  • Rémi AVIGNON

    (CREST, Institut Polytechnique de Paris)

  • Claire CHAMBOLLE

    (ALISS UR1303, INRA, Université Paris-Saclay, F-94200 Ivry-sur-Seine, France, and CREST)

Abstract

We analyze the impact of purchasing alliances on product variety and profit sharing in a setting, in which capacity constrained retailers operate in separated markets and select their assortment in a set of differentiated products offered by heterogeneous suppliers (multinationals vs. local SMEs). Retailers may either have independent listing strategies or build a buying group, thereby committing to a joint listing strategy. This alliance may cover the whole product line (full buying group) or only the products of large suppliers (partial buying group). We show that a buying group may enhance the retailers’ buyer power and reduce the overall product variety to the detriment of consumers. Our most striking result is that partial buying groups do not protect the small suppliers from being excluded or from bearing profit losses; they may even be more profitable for retailers than full buying groups.

Suggested Citation

  • Marie-Laure ALLAIN & Rémi AVIGNON & Claire CHAMBOLLE, 2020. "Purchasing Alliances and Product Variety," Working Papers 2020-13, Center for Research in Economics and Statistics.
  • Handle: RePEc:crs:wpaper:2020-13
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    More about this item

    Keywords

    Vertical relations; buying group; purchasing alliance; buyer power; vertical foreclosure.;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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