Buyer Alliances in Vertically Related Markets

66 Pages Posted: 20 Sep 2019 Last revised: 5 Aug 2020

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 are commonplace. 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 alliances formed by retailers on their bargaining power vis-à-vis manufacturers 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 retailers’ bargaining ability play an important role in the countervailing force exerted by buyer alliances which, absent this effect, would have harmed 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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