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Buyer-Size Discounts and Inflation Dynamics

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Listed:
  • Mayumi Ojima
  • Junnosuke Shino
  • Kozo Ueda

Abstract

This paper considers the macroeconomic effects of retailers' market concentration and buyer-size discounts on inflation dynamics. During Japan's "lost decades", large retailers enhanced their market power, leading to increased exploitation of buyer-size discounts in procuring goods. We incorporate this effect into an otherwise standard New- Keynesian model. Calibrating to the Japanese economy during the lost decades, we find that despite a reduction in procurement cost, strengthened buyer-size discounts did not cause deflation; rather, they caused inflation of 0.1% annually. This arose from an increase in the real wage due to the expansion of production.

Suggested Citation

  • Mayumi Ojima & Junnosuke Shino & Kozo Ueda, 2014. "Buyer-Size Discounts and Inflation Dynamics," CAMA Working Papers 2014-04, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2014-04
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    References listed on IDEAS

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    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.
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