One‐Stop Shopping Behavior, Buyer Power and Upstream Merger Incentives

29 Pages Posted: 25 Apr 2018

See all articles by Irina Baye

Irina Baye

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE)

Vanessa von Schlippenbach

German Institute for Economic Research (DIW Berlin)

Christian Wey

University of Düsseldorf - Düsseldorf Institute for Competition Economics (DICE)

Date Written: March 2018

Abstract

We analyze how consumer preferences for one‐stop shopping affect the (Nash) bargaining relationships between a retailer and its suppliers. One‐stop shopping preferences create ‘demand complementarities’ among otherwise independent products which lead to two opposing effects on upstream merger incentives: first a standard double mark‐up problem and second a bargaining effect. The former creates merger incentives while the later induces suppliers to bargain separately. When buyer power becomes large enough, then suppliers stay separated which raises final good prices. We also show that our result can be obtained when wholesale prices are determined in a non‐cooperative game and under two‐part tariffs.

Suggested Citation

Baye, Irina and Schlippenbach, Vanessa von and Wey, Christian, One‐Stop Shopping Behavior, Buyer Power and Upstream Merger Incentives (March 2018). The Journal of Industrial Economics, Vol. 66, Issue 1, pp. 66-94, 2018, Available at SSRN: https://ssrn.com/abstract=3168210 or http://dx.doi.org/10.1111/joie.12160

Irina Baye (Contact Author)

Heinrich Heine University Dusseldorf - Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

Vanessa von Schlippenbach

German Institute for Economic Research (DIW Berlin) ( email )

Mohrenstraße 58
Berlin, 10117
Germany

Christian Wey

University of Düsseldorf - Düsseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany
+49-211-81-15009 (Phone)
+49-211-81-15499 (Fax)

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