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The Countervailing Power Hypothesis when Dominant Retailers Function as Sales Promoters

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  • Noriaki Matsushima
  • Shohei Yoshida

Abstract

We consider a downstream oligopoly model with one dominant and several fringe retailers, who purchase a manufacturing product from a monopoly supplier. We then examine how the supplier's outside option influences the relation between the dominant retailer's bargaining power and the equilibrium retail price. If the market demand shrinks due to a breakdown of bargaining between the supplier and the dominant retailer, who works as a sales promoter for the product, there is a negative relation between the bargaining power and the retail price.

Suggested Citation

  • Noriaki Matsushima & Shohei Yoshida, 2016. "The Countervailing Power Hypothesis when Dominant Retailers Function as Sales Promoters," ISER Discussion Paper 0981r, Institute of Social and Economic Research, Osaka University, revised Jul 2017.
  • Handle: RePEc:dpr:wpaper:0981r
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    File URL: http://www.iser.osaka-u.ac.jp/library/dp/2016/DP0981R.pdf
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    References listed on IDEAS

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