Abstract

http://ssrn.com/abstract=1817170
 


 



Strategic Buying to Prevent Seller Exit


C. Robert Clark


HEC Montreal

Mattias Polborn


University of Illinois at Urbana-Champaign - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Summer 2011

Journal of Economics & Management Strategy, Vol. 20, Issue 2, pp. 339-378, 2011

Abstract:     
We consider a dynamic oligopoly model in which a seller may drop out of the market when demand for its product is insufficient in the first period. Buyers suffer some disutility if a seller exits the market and so their first-period purchase decision not only depends on current period preferences and prices, but also on the potential effect that their behavior has on the probability of seller survival. Specifically, some buyers may choose to purchase from the seller with the lower survival probability even though they like the other seller's product better, a behavior that we call "strategic buying". We analyze how the incidence of strategic buying depends on parameters and also the implications of the strategic buying motive for sellers' first-period pricing decisions.

Number of Pages in PDF File: 40

Accepted Paper Series


Date posted: April 21, 2011  

Suggested Citation

Clark, C. Robert and Polborn, Mattias, Strategic Buying to Prevent Seller Exit (Summer 2011). Journal of Economics & Management Strategy, Vol. 20, Issue 2, pp. 339-378, 2011. Available at SSRN: http://ssrn.com/abstract=1817170 or http://dx.doi.org/10.1111/j.1530-9134.2011.00291.x

Contact Information

C. Robert Clark (Contact Author)
HEC Montreal ( email )
3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
Mattias K. Polborn
University of Illinois at Urbana-Champaign - Department of Economics ( email )
410 David Kinley Hall
1407 W. Gregory
Urbana, IL 61801
United States
CESifo (Center for Economic Studies and Ifo Institute)
Poschinger Str. 5
Munich, DE-81679
Germany
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