Purchase - $38.00

Strategic Buying to Prevent Seller Exit

40 Pages Posted: 21 Apr 2011  

C. Robert Clark

HEC Montreal

Mattias Polborn

Vanderbilt University - College of Arts and Science - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: Summer 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.

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: https://ssrn.com/abstract=1817170 or http://dx.doi.org/10.1111/j.1530-9134.2011.00291.x

C. Robert Clark (Contact Author)

HEC Montreal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

Mattias K. Polborn

Vanderbilt University - College of Arts and Science - Department of Economics ( email )

Box 1819 Station B
Nashville, TN 37235
United States

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Paper statistics

Downloads
2
Abstract Views
181