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Overbuying, demand withholding, and single sourcing under decreasing returns

Author

Listed:
  • Christophe Bernard

    (TBS - Toulouse Business School)

  • Sébastien Mitraille

    (IMT-BS - MMS - Département Management, Marketing et Stratégie - TEM - Télécom Ecole de Management - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris], LITEM - Laboratoire en Innovation, Technologies, Economie et Management (EA 7363) - UEVE - Université d'Évry-Val-d'Essonne - Université Paris-Saclay - IMT-BS - Institut Mines-Télécom Business School - IMT - Institut Mines-Télécom [Paris])

Abstract

Consider suppliers whose comparative advantages, which are unknown to a buyer, depend on the quantity procured. The distortions of the buyer purchase policy differs depending on the market characteristics. In a large market, either it overbuys to suppliers with steep marginal costs, who are better at producing a small volume; or it withholds the demand it addresses to suppliers with flatter marginal costs, who are better at producing a large volume. The latter policy is implemented through a concave tariff offered to the less capacity constrained suppliers. In a small market, demand withholding prevails and some suppliers can be excluded.

Suggested Citation

  • Christophe Bernard & Sébastien Mitraille, 2026. "Overbuying, demand withholding, and single sourcing under decreasing returns," Post-Print hal-05529271, HAL.
    • Handle: RePEc:hal:journl:hal-05529271
    DOI: 10.1111/joie.70021
    as

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