Buyer Power and the Waterbed Effect

20 Pages Posted: 28 Mar 2011

See all articles by Roman Inderst

Roman Inderst

Goethe University Frankfurt

Tommaso M. Valletti

Imperial College Business School; Centre for Economic Policy Research (CEPR)

Date Written: March 2011

Abstract

When a buyer is able to obtain lower input prices from a supplier, is it possible that other buyers will have to pay more for the same input as a result? Is this bad for consumers? We present a model that analyzes the conditions under which the asymmetric exercise of buyer power can lead to consumer detriment through raising other buyers' wholesale prices (the waterbed effect).

Suggested Citation

Inderst, Roman and Valletti, Tommaso M., Buyer Power and the Waterbed Effect (March 2011). The Journal of Industrial Economics, Vol. 59, Issue 1, pp. 1-20, 2011. Available at SSRN: https://ssrn.com/abstract=1794832 or http://dx.doi.org/10.1111/j.1467-6451.2011.00443.x

Roman Inderst (Contact Author)

Goethe University Frankfurt ( email )

Theodor-W.-Adorno-Platz 3
Frankfurt am Main, Hessen 60629
Germany
+49 (69) 798-34601 (Phone)
+49 (69) 798-35000 (Fax)

HOME PAGE: http://www.wiwi.uni-frankfurt.de/en/departments/finance/lehrstuhl/prof-dr-roman-inderst/team

Tommaso M. Valletti

Imperial College Business School ( email )

South Kensington Campus
Exhibition Road
London SW7 2AZ, SW7 2AZ
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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