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Buyer Power in International Markets

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  • Raff, Horst
  • Schmitt, Nicolas

Abstract

This paper investigates the implications for international markets of the existence of retailers/wholesalers with market power. Two main results are shown. First, in the presence of buyer power trade liberalization may lead to retail market concentration. Due to this concentration retail prices may be higher and welfare may be lower in free trade than in autarky, thus reversing the standard effects of trade liberalization. Second, the pro-competitive effects of trade liberalization are weaker under buyer power than under seller power.

Suggested Citation

  • Raff, Horst & Schmitt, Nicolas, 2008. "Buyer Power in International Markets," Kiel Working Papers 1431, Kiel Institute for the World Economy (IfW).
  • Handle: RePEc:zbw:ifwkwp:1431
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    File URL: https://www.econstor.eu/bitstream/10419/17894/1/KWP_1431.pdf
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    References listed on IDEAS

    as
    1. Raff, Horst & Schmitt, Nicolas, 2009. "Buyer power in international markets," Journal of International Economics, Elsevier, vol. 79(2), pages 222-229, November.
    2. Elhanan Helpman, 2006. "Trade, FDI, and the Organization of Firms," Journal of Economic Literature, American Economic Association, vol. 44(3), pages 589-630, September.
    3. Robert C. Feenstra & Gordon H. Hanson, 2004. "Intermediaries in Entrepot Trade: Hong Kong Re-Exports of Chinese Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 13(1), pages 3-35, March.
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    6. Raff, Horst & Schmitt, Nicolas, 2006. "Exclusive dealing and common agency in international markets," Journal of International Economics, Elsevier, vol. 68(2), pages 485-503, March.
    7. Chen, Zhiqi, 2003. " Dominant Retailers and the Countervailing-Power Hypothesis," RAND Journal of Economics, The RAND Corporation, vol. 34(4), pages 612-625, Winter.
    8. Paul Dobson & Roger Clarke & Stephen Davies & Michael Waterson, 2001. "Buyer Power and its Impact on Competition in the Food Retail Distribution Sector of the European Union," Journal of Industry, Competition and Trade, Springer, vol. 1(3), pages 247-281, September.
    9. Dobson, Paul W & Waterson, Michael, 1997. "Countervailing Power and Consumer Prices," Economic Journal, Royal Economic Society, vol. 107(441), pages 418-430, March.
    10. Patrick Rey & Jeanine Thal & Thibaud Vergé, 2006. "Slotting Allowances and Conditional Payments," Working Papers 2006-23, Center for Research in Economics and Statistics.
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    12. Inderst, Roman & Wey, Christian, 2007. "Buyer power and supplier incentives," European Economic Review, Elsevier, vol. 51(3), pages 647-667, April.
    13. Raff, Horst & Schmitt, Nicolas, 2005. "Endogenous vertical restraints in international trade," European Economic Review, Elsevier, vol. 49(7), pages 1877-1889, October.
    14. Sofia Berto Villas-Boas, 2007. "Vertical Relationships between Manufacturers and Retailers: Inference with Limited Data," Review of Economic Studies, Oxford University Press, vol. 74(2), pages 625-652.
    15. Leslie M. Marx & Greg Shaffer, 2007. "Upfront payments and exclusion in downstream markets," RAND Journal of Economics, RAND Corporation, vol. 38(3), pages 823-843, September.
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    17. Greg Shaffer, 1991. "Slotting Allowances and Resale Price Maintenance: A Comparison of Facilitating Practices," RAND Journal of Economics, The RAND Corporation, vol. 22(1), pages 120-135, Spring.
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    19. von Ungern-Sternberg, Thomas, 1996. "Countervailing power revisited," International Journal of Industrial Organization, Elsevier, vol. 14(4), pages 507-519, June.
    20. James E. Rauch, 2001. "Business and Social Networks in International Trade," Journal of Economic Literature, American Economic Association, vol. 39(4), pages 1177-1203, December.
    21. Gereffi, Gary, 1999. "International trade and industrial upgrading in the apparel commodity chain," Journal of International Economics, Elsevier, vol. 48(1), pages 37-70, June.
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    Citations

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    Cited by:

    1. Emek Basker & Pham Hoang Van, 2010. "Imports "Я" Us: Retail Chains as Platforms for Developing-Country Imports," American Economic Review, American Economic Association, vol. 100(2), pages 414-418, May.
    2. Angela Cheptea & Charlotte Emlinger & Karine Latouche, 2012. "Multinational Retailers and Home Country Exports," Post-Print hal-01208840, HAL.
    3. Gabriel Felbermayr & Benjamin Jung, 2011. "Trade Intermediation and the Organization of Exporters," Review of International Economics, Wiley Blackwell, vol. 19(4), pages 634-648, September.
    4. Yu-Fu Chen & Michael Funke, 2010. "Booms, Recessions And Financial Turmoil: A Fresh Look At Investment Decisions Under Cyclical Uncertainty," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(s1), pages 290-317, July.
    5. Meinen, Philipp & Raff, Horst, 2018. "International trade and retail market performance and structure: Theory and empirical evidence," KCG Working Papers 12, Kiel Centre for Globalization (KCG).
    6. Horst Raff & Nicolas Schmitt, 2016. "Manufacturers and retailers in the global economy," Canadian Journal of Economics, Canadian Economics Association, vol. 49(2), pages 685-706, May.
    7. Robert Kappel, 2010. "On the Economics of Regional Powers: Comparing China, India, Brazil, and South Africa," GIGA Working Paper Series 145, GIGA German Institute of Global and Area Studies.
    8. Raff, Horst & Schmitt, Nicolas, 2009. "Buyer power in international markets," Journal of International Economics, Elsevier, vol. 79(2), pages 222-229, November.
    9. Raff, Horst & Schmitt, Nicolas, 2009. "Imports, pass-through, and the structure of retail markets," Kiel Working Papers 1556, Kiel Institute for the World Economy (IfW).
    10. Kamal Saggi, 2016. "Trade, Intellectual Property Rights, and the World Trade Organization," Vanderbilt University Department of Economics Working Papers 16-00014, Vanderbilt University Department of Economics.
    11. Stefano Bolatto & Marco Grazzi & Chiara Tomasi, 2018. "Export Modes and Adjustments to Exchange Rate Movements," DEM Working Papers 2018/02, Department of Economics and Management.
    12. Raff, Horst & Schmitt, Nicolas, 2015. "Retailing and international trade: A survey of the literature," Economics Working Papers 2015-02, Christian-Albrechts-University of Kiel, Department of Economics.
    13. Jen Baggs & Loretta Fung & Beverly Lapham, 2015. "Exchange Rates, Cross-Border Travel, and Retailers: Theory and Empirics," Working Papers 1351, Queen's University, Department of Economics.
    14. S. Bolatto & M. Grazzi & C. Tomasi, 2017. "Export intermediaries and adjustments to exchange rate movements," Working Papers wp2004, Dipartimento Scienze Economiche, Universita' di Bologna.
    15. repec:spr:weltar:v:153:y:2017:i:3:d:10.1007_s10290-017-0284-2 is not listed on IDEAS
    16. Horst Raff & Nicolas Schmitt, 2012. "Imports and the structure of retail markets," Canadian Journal of Economics, Canadian Economics Association, vol. 45(4), pages 1431-1455, November.
    17. Fabio Musso & Mario Risso & Barbara Francioni, 2011. "Grande distribuzione alimentare e criteri di selezione dei fornitori nella prospettiva dei piccoli e medi produttori," MERCATI E COMPETITIVITÀ, FrancoAngeli Editore, vol. 2011(1), pages 73-92.

    More about this item

    Keywords

    buyer power; retailing; international trade;

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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