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Buyer power in large buyer groups?

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  • Lisa Bruttel

Abstract

This paper studies the exertion of market power in large buyer groups confronting an incumbent monopolist and a potential market entrant in a repeated trade situation. In the experiment, buyer power can either occur as demand withholding when only the incumbent is present in the market, or it can take the form of buying at higher prices from the entrant in order to foster future re-entry. Comparing markets with groups of two and eight buyers, we find that both forms are prevalent irrespective of the number of buyers. However, a control treatment shows that seemingly strategic behavior is better explained by inequality aversion of the buyers towards the two different sellers.

Suggested Citation

  • Lisa Bruttel, 2014. "Buyer power in large buyer groups?," TWI Research Paper Series 92, Thurgauer Wirtschaftsinstitut, Universität Konstanz.
    • Handle: RePEc:twi:respas:0092
    as

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    File URL: https://www.twi-kreuzlingen.ch/wp-content/uploads/2017/12/twi-rps-092-bruttel.pdf
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    References listed on IDEAS

    as
    1. Lisa V. Bruttel & Jochen Glöckner, 2011. "Strategic Buyers And Market Entry," Journal of Competition Law and Economics, Oxford University Press, vol. 7(2), pages 381-402.
    2. Okada, Akira & Riedl, Arno, 2005. "Inefficiency and social exclusion in a coalition formation game: experimental evidence," Games and Economic Behavior, Elsevier, vol. 50(2), pages 278-311, February.
    3. Jean-Robert Tyran & Dirk Engelmann, 2005. "To Buy or Not to Buy? An Experimental Study of Consumer Boycotts in Retail Markets," Economica, London School of Economics and Political Science, vol. 72(285), pages 1-16, February.
    4. Hinloopen,Jeroen (ed.), 2009. "Experiments and Competition Policy," Cambridge Books, Cambridge University Press, number 9780521493420.
    5. Jim Engle-Warnick & Bradley Ruffle, 2006. "Buyer Concentration As A Source Of Countervailing Power: Evidence From Experimental Posted-Offer Markets," Departmental Working Papers 2006-12, McGill University, Department of Economics.
    6. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer;Economic Science Association, vol. 10(2), pages 171-178, June.
    7. Greiner, Ben, 2004. "An Online Recruitment System for Economic Experiments," MPRA Paper 13513, University Library of Munich, Germany.
    8. Bradley J. Ruffle, 2005. "Buyer Countervailing Power: A Survey of Experimental Evidence," Working Papers 0512, Ben-Gurion University of the Negev, Department of Economics.
    9. John Kagel & Katherine Wolfe, 2001. "Tests of Fairness Models Based on Equity Considerations in a Three-Person Ultimatum Game," Experimental Economics, Springer;Economic Science Association, vol. 4(3), pages 203-219, December.
    10. Kritikos, Alexander & Bolle, Friedel, 2004. "Punishment as a public good. When should monopolists care about a consumer boycott?," Journal of Economic Psychology, Elsevier, vol. 25(3), pages 355-372, June.
    11. Bradley J. Ruffle, 2000. "Some factors affecting demand withholding in posted-offer markets," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 16(3), pages 529-544.
    Full references (including those not matched with items on IDEAS)

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    Keywords

    buyer power; market entry; experiment;
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