Threat of Exit as a Source of Bargaining Power
This article analyzes a simple two period model where two homogenous manufacturers compete to supply a monopolist retailer. We show that if manufacturers are vulnerable (i.e if they are likely to exit the market in case of insufficient orders in the first period) they may exploit their threat of exit to capture the whole first period industry profit. Indeed, the retailer will accept to pay the high price to the manufacturers in order to secure upstream competition in the second period. Results are robust under different market structures or contract types.
|Date of creation:||01 Sep 2009|
|Contact details of provider:|| Postal: Place Montesquieu 3, 1348 Louvain-la-Neuve (Belgium)|
Fax: +32 10473945
Web page: http://www.uclouvain.be/ires
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Holmström, Bengt & Tirole, Jean, 1994.
"Financial Intermediation, Loanable Funds and the Real Sector,"
IDEI Working Papers
40, Institut d'Économie Industrielle (IDEI), Toulouse.
- Bengt Holmstrom & Jean Tirole, 1997. "Financial Intermediation, Loanable Funds, and The Real Sector," The Quarterly Journal of Economics, Oxford University Press, vol. 112(3), pages 663-691.
- Bengt Holmstrom & Jean Tirole, 1994. "Financial Intermediation, Loanable Funds and the Real Sector," Working papers 95-1, Massachusetts Institute of Technology (MIT), Department of Economics.
- Claire Chambolle & Sofia Villas-Boas, 2007.
"Buyer Power through Producer's Differentiation,"
- Chambolle, Claire & Villas-Boas, Sofia B, 2008. "Buyer Power through Producer's Differentiation," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt7b93w47c, Department of Agricultural & Resource Economics, UC Berkeley.
- Villas-Boas, Sofia B & Chambolle, Claire, 2015. "Buyer Power Through Producer Differentiation," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt0wz728n8, Department of Agricultural & Resource Economics, UC Berkeley.
- Chambolle, Claire & Villas-Boas, Sofia B, 2007. "Buyer power through producer's differentiation," CUDARE Working Paper Series 1042, University of California at Berkeley, Department of Agricultural and Resource Economics and Policy.
- Inderst, Roman & Wey, Christian, 2007.
"Buyer power and supplier incentives,"
European Economic Review,
Elsevier, vol. 51(3), pages 647-667, April.
- Roman Inderst & Christian Wey, 2005. "Buyer Power and Supplier Incentives," Discussion Papers of DIW Berlin 464, DIW Berlin, German Institute for Economic Research.
- Roman Inderst & Christian Wey, 2003. "Buyer Power and Supplier Incentives," CIG Working Papers SP II 2003-05, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
- Inderst, Roman & Wey, Christian, 2002. "Buyer Power and Supplier Incentives," CEPR Discussion Papers 3547, C.E.P.R. Discussion Papers.
- Marie-Laure Allain, 1999.
"The Balance of Power Between Producers and Retailers : A Differentiation Model,"
99-17, Centre de Recherche en Economie et Statistique.
- Marie-Laure Allain, 2002. "The Balance of Power between Producers and Retailers ; a Differentiation model," Recherches économiques de Louvain, De Boeck Université, vol. 68(3), pages 359-370.
- Marie-Laure ALLAIN, 2002. "The balance of power between producers and retailers : a differentiation model," Discussion Papers (REL - Recherches Economiques de Louvain) 2002034, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Biglaiser, Gary & Vettas, Nikolaos, 2004.
"Dynamic Price Competition with Capacity Constraints and Strategic Buyers,"
CEPR Discussion Papers
4315, C.E.P.R. Discussion Papers.
- Gary Biglaiser & Nikolaos Vettas, 2007. "Dynamic price competition with capacity constraints and strategic buyers," Working Papers 24, Portuguese Competition Authority.
- Dobson, Paul W & Waterson, Michael, 1997. "Countervailing Power and Consumer Prices," Economic Journal, Royal Economic Society, vol. 107(441), pages 418-430, March.
- Biglaiser, Gary & DeGraba, Patrick, 2001. "Downstream Integration by a Bottleneck Input Supplier Whose Regulated Wholesale Prices Are Above Costs," RAND Journal of Economics, The RAND Corporation, vol. 32(2), pages 302-315, Summer.
- Tracy R. Lewis & Huseyin Yildirim, 2002. "Managing Dynamic Competition," American Economic Review, American Economic Association, vol. 92(4), pages 779-797, September.
When requesting a correction, please mention this item's handle: RePEc:ctl:louvre:2009033. 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: (Sebastien SCHILLINGS)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.