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The Buyer Power Effect of Retail Mergers: An Empirical Model of Bargaining with Equilibrium of Fear

Author

Listed:
  • Céline Bonnet

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Zohra Bouamra-Mechemache

    (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - UT - Université de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

  • Hugo Molina

    (AgroParisTech)

Abstract

We develop a bilateral oligopoly framework with manufacturer-retailer bargaining to analyze the impact of retail mergers on market outcomes. We show that the surplus division between manufacturers and retailers depends on three bargaining forces and can be interpreted in terms of an "equilibrium of fear". We estimate our framework in the French soft drink industry and find that retailers have greater bargaining power than manufacturers. Using counterfactual simulations, we highlight that retail mergers increase retailers' fear of disagreement relative to that of manufacturers, which weakens their buyer power and leads to higher wholesale and retail prices.

Suggested Citation

  • Céline Bonnet & Zohra Bouamra-Mechemache & Hugo Molina, 2023. "The Buyer Power Effect of Retail Mergers: An Empirical Model of Bargaining with Equilibrium of Fear," Post-Print hal-03375907, HAL.
    • Handle: RePEc:hal:journl:hal-03375907
    Note: View the original document on HAL open archive server: https://hal.inrae.fr/hal-03375907v4
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    References listed on IDEAS

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    Keywords

    Bilateral oligopoly; Bargaining; Retail mergers; Soft drink industry;
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