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Threat of exit as a source of bargaining power
[Risque de faillite et pouvoir de marché]

Author

Listed:
  • Fabian Berges

    (Groupe de recherche en économie mathématique et quantitative - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - INRA - Institut National de la Recherche Agronomique - CNRS - Centre National de la Recherche Scientifique)

  • Claire C. Chambolle

    (ALISS - Alimentation et sciences sociales - INRA - Institut National de la Recherche Agronomique)

Abstract

This article analyzes a simple two-period model where two homogenous manufacturers compete to supply a monopolist retailer. The authors 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.

Suggested Citation

  • Fabian Berges & Claire C. Chambolle, 2009. "Threat of exit as a source of bargaining power [Risque de faillite et pouvoir de marché]," Post-Print hal-02654192, HAL.
    • Handle: RePEc:hal:journl:hal-02654192
    DOI: 10.3917/rel.753.0353
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    Cited by:

    1. Armel Jacques, 2019. "Les enjeux du rachat de Vindémia : quelques éléments de théorie économique," Post-Print hal-03546561, HAL.
    2. Tuuli-Anna Huikuri, 2023. "Constraints and incentives in the investment regime: How bargaining power shapes BIT reform," The Review of International Organizations, Springer, vol. 18(2), pages 361-391, April.

    More about this item

    Keywords

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    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • Q12 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Micro Analysis of Farm Firms, Farm Households, and Farm Input Markets

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