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The Buyer Power Of Multiproduct Retailers: Competition With One-Stop Shopping

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    This paper illustrates how, in local retail markets, a multiproduct retailer may gain buyer power when some consumers are one-stop shoppers (multi-product shop-pers). We consider a model where independent suppliers negotiate terms of trade with a large multiproduct retailer and a group of smaller single product retailers, respectively. We find that an increase in the share of one-stop shoppers intensifies the degree of competition between the retailers, and hence reduces the overall industry profit –while at the same time enabling the multiproduct retailer to obtain discounts from its suppliers, in the form of lower fixed fees. We also show that the presence of a large retailer may positively affect the suppliers’incentives to invest in product quality or cost reductions.

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    File URL: https://www.uib.no/filearchive/wp.03.12.pdf
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    Paper provided by University of Bergen, Department of Economics in its series Working Papers in Economics with number 03/12.

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    Length: 152 pages
    Date of creation: 01 Feb 2012
    Date of revision:
    Handle: RePEc:hhs:bergec:2012_003
    Contact details of provider: Postal: Institutt for økonomi, Universitetet i Bergen, Postboks 7802, 5020 Bergen, Norway
    Phone: (+47)55589200
    Fax: (+47)55589210
    Web page: http://www.uib.no/econ/en
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    1. Bliss, Christopher, 1988. "A Theory of Retail Pricing," Journal of Industrial Economics, Wiley Blackwell, vol. 36(4), pages 375-91, June.
    2. Zhiqi Chen, 2004. "Countervailing Power and Product Diversity," Econometric Society 2004 North American Winter Meetings 279, Econometric Society.
    3. Suchan Chae & Paul Heidhues, 2003. "Buyers’ Alliances for Bargaining Power," CIG Working Papers SP II 2003-24, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    4. Roman Inderst & Christian Wey, 2003. "Buyer Power and Supplier Incentives," CIG Working Papers SP II 2003-05, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    5. Rajiv Lal & Carmen Matutes, 1989. "Price Competition in Multimarket Duopolies," RAND Journal of Economics, The RAND Corporation, vol. 20(4), pages 516-537, Winter.
    6. Roman Inderst & Christian Wey, 2011. "Countervailing Power And Dynamic Efficiency," Journal of the European Economic Association, European Economic Association, vol. 9(4), pages 702-720, 08.
    7. Pierpaolo Battigalli & Chiara Fumagalli & Michele Polo, 2006. "Buyer Power and Quality Improvement," Working Papers 310, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
    8. Tasneem Chipty & Christopher M. Snyder, 1999. "The Role Of Firm Size In Bilateral Bargaining: A Study Of The Cable Television Industry," The Review of Economics and Statistics, MIT Press, vol. 81(2), pages 326-340, May.
    9. Roman Inderst & Greg Shaffer, 2007. "Retail Mergers, Buyer Power and Product Variety," Economic Journal, Royal Economic Society, vol. 117(516), pages 45-67, 01.
    10. Dobson, Paul W & Waterson, Michael, 1997. "Countervailing Power and Consumer Prices," Economic Journal, Royal Economic Society, vol. 107(441), pages 418-30, March.
    11. Alexander Raskovich, 2003. "Pivotal Buyers and Bargaining Position," Journal of Industrial Economics, Wiley Blackwell, vol. 51(4), pages 405-426, December.
    12. Horn, Henrik & Wolinsky, Asher, 1988. "Worker Substitutability and Patterns of Unionisation," Economic Journal, Royal Economic Society, vol. 98(391), pages 484-97, June.
    13. Zhiqi Chen, 2001. "Dominant Retailers and the Countervailing Power Hypothesis," Carleton Economic Papers 01-05, Carleton University, Department of Economics, revised 2003.
    14. Lal, Rajiv & Matutes, Carmen, 1994. "Retail Pricing and Advertising Strategies," The Journal of Business, University of Chicago Press, vol. 67(3), pages 345-70, July.
    15. Rey, Patrick & Chen, Zhijun, 2010. "Loss Leading as an Exploitative Practice," TSE Working Papers 10-218, Toulouse School of Economics (TSE), revised Dec 2011.
    16. von Schlippenbach, Vanessa & Wey, Christian, 2011. "One-stop shopping behavior, buyer power, and upstream merger incentives," DICE Discussion Papers 27, Heinrich‐Heine‐Universität Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    17. Roman Inderst & Christian Wey, 2001. "Bargaining, Mergers, and Technology Choice in Bilaterally Oligopolistic Industries," CIG Working Papers FS IV 01-19, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
    18. von Ungern-Sternberg, Thomas, 1996. "Countervailing power revisited," International Journal of Industrial Organization, Elsevier, vol. 14(4), pages 507-519, June.
    19. Howard Smith & Donald Hay, 2005. "Streets, Malls, and Supermarkets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(1), pages 29-59, 03.
    20. Beggs, Alan W, 1994. "Mergers and Malls," Journal of Industrial Economics, Wiley Blackwell, vol. 42(4), pages 419-28, December.
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