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Buyer power through the differentiation of suppliers

Author

Listed:
  • Claire Chambolle

    (ALISS - Alimentation et sciences sociales - INRA - Institut National de la Recherche Agronomique, CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - Groupe ENSAE-ENSAI - Groupe des Écoles Nationales d'Économie et Statistique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique)

  • Sofia B Villas-Boas

    (ARE - Department of Agricultural and Resource Economics [Berkeley] - UC Berkeley - University of California [Berkeley] - UC - University of California)

Abstract

This paper argues that rival retailers may choose to differentiate their supplying producers, even at the expense of downgrading the quality of the product offered to consumers, to improve their buyer power. We show that, through the differentiation of suppliers, a retailer may obtain a larger slice of a smaller pie, i.e, smaller bilateral joint profits. Thus, the "only" purpose of differentiation is to gain increasing buyer power. This result may hold (i) when retailers compete in the final market or (ii) when retailers are active in separate markets. The differentiation of suppliers, which results from a buyer power motive, may be harmful for consumer surplus and social welfare.

Suggested Citation

  • Claire Chambolle & Sofia B Villas-Boas, 2015. "Buyer power through the differentiation of suppliers," Post-Print hal-03283954, HAL.
    • Handle: RePEc:hal:journl:hal-03283954
    DOI: 10.1016/j.ijindorg.2015.09.002
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    Cited by:

    1. Emanuele Bacchiega & Olivier Bonroy & Emmanuel Petrakis, 2018. "Contract contingency in vertically related markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(4), pages 772-791, October.
    2. Hayashida, K., 2018. "Bargaining Power between Food Processors and Retailers: Evidence from Japanese Milk Transactions," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 277730, International Association of Agricultural Economists.
    3. Allain, Marie-Laure & Avignon, Rémi & Chambolle, Claire, 2020. "Purchasing alliances and product variety," International Journal of Industrial Organization, Elsevier, vol. 73(C).
    4. Claire Chambolle & Clémence Christin, 2021. "New Product Introduction and Slotting Fees," Journal of Industrial Economics, Wiley Blackwell, vol. 69(2), pages 410-442, June.
    5. Kurtyka, Oliwia & Mabrouk, Rania, 2025. "Does adoption always follow innovation?," Resource and Energy Economics, Elsevier, vol. 83(C).
    6. Gonzalo Wandosell & María Concepción Parra-Meroño & Raul Baños, 2019. "Online Store Locator: An Essential Resource for Retailers in the 21st Century," Social Sciences, MDPI, vol. 8(2), pages 1-13, February.
    7. Chambolle, Claire & Christin, Clémence & Molina, Hugo, 2023. "Buyer power and exclusion: A progress report," International Journal of Industrial Organization, Elsevier, vol. 90(C).

    More about this item

    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

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