Buyer Alliances in Vertically Related Markets

71 Pages Posted: 20 Sep 2019 Last revised: 31 Oct 2019

See all articles by Hugo Molina

Hugo Molina

French National Institute for Agricultural Research (INRA)

Date Written: September 12, 2019

Abstract

Supplement is available at: https://ssrn.com/abstract=3452506

Alliances of buyers to negotiate input prices with suppliers have become commonplace in many industries. Using pre- and post-alliances data on household purchases of bottled water, I develop a structural model of bilateral oligopoly to estimate the effects of buyer alliances formed by retailers on the bargaining power of firms and retail prices paid by consumers. Results provide evidence of a countervailing buyer power effect that reduces retail prices by roughly 7%. Exploring determinants of buyer power, I find that changes in firms’ bargaining ability play an important role in the countervailing force exerted by buyer alliances which, absent this effect, may harm retailers.

Keywords: Bilateral oligopoly, Countervailing buyer power, Bargaining, Antitrust policy

JEL Classification: C78, D43, L11, L13, L14, L41, L81

Suggested Citation

Molina, Hugo, Buyer Alliances in Vertically Related Markets (September 12, 2019). Available at SSRN: https://ssrn.com/abstract=3452497 or http://dx.doi.org/10.2139/ssrn.3452497

Hugo Molina (Contact Author)

French National Institute for Agricultural Research (INRA) ( email )

65 boulevard de Brandebourg
Ivry-sur-Seine, 94205
France

HOME PAGE: http://sites.google.com/site/hugomolinaresearch/

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