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Buyer power and exclusion in vertically related markets

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Abstract
We explore how the incentives for exclusion, both in upstream and downstream vertical markets, are related to the bargaining position of suppliers and retailers. We consider a model with a dominant upstream manufacturer and a competitive fringe of producers of imperfect substitutes offering their products to two differentiated downstream retailers. In this model we contrast the equilibrium outcome in two alternative situations. The first one is when the dominant supplier holds all the bargaining power, and this is compared with the outcome when the retailers have all the bargaining power. We show that exclusion occurs when interbrand and intrabrand competition is strong. Moreover, in contrast to the received literature, we find that when retailers have buyer power, this enhances welfare compared to when the manufacturer holds all the bargaining power.

Suggested Citation

  • Gabrielsen, Tommy Staahl & Johansen, Bjørn Olav, 2012. "Buyer power and exclusion in vertically related markets," Working Papers in Economics 01/12, University of Bergen, Department of Economics.
    • Handle: RePEc:hhs:bergec:2012_001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Gabrielsen, Tommy Staahl & Johansen, Bjørn Olav, 2013. "Resale Price Maintenance And Up-Front Payments: Achieving Horizontal Control Under Seller And Buyer Power," Working Papers in Economics 02/13, University of Bergen, Department of Economics.
    2. Liang Lu, 2017. "A Comparison of the Wholesale Model and the Agency Model in Differentiated Markets," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 51(2), pages 151-172, September.
    3. Liang Lu, 2015. "A Comparison of the Wholesale Structure and the Agency Structure in Differentiated Markets," Working Paper series, University of East Anglia, Centre for Competition Policy (CCP) 2015-07v2, Centre for Competition Policy, University of East Anglia, Norwich, UK..
    4. Maruyama, Masayoshi & Zennyo, Yusuke, 2020. "Platform most-favored-customer clauses and investment incentives," International Journal of Industrial Organization, Elsevier, vol. 70(C).
    5. Lømo, Teis Lunde & Meland, Frode & Sandvik, Håvard Mork, 2020. "Do slotting allowances reduce product variety?," Working Papers in Economics 7/20, University of Bergen, Department of Economics.
    6. Qiu Zhao, 2019. "The Influence of Buyer Power on Supply Chain Pricing with Downstream Competition," Sustainability, MDPI, vol. 11(10), pages 1-19, May.
    7. Mao Yuan & Shi‐hua Ma & Xu Guan & Ying‐Ju Chen, 2021. "Channel configuration in a complementary market under different power structures," Naval Research Logistics (NRL), John Wiley & Sons, vol. 68(2), pages 157-158, March.

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    More about this item

    Keywords

    exclusive dealing; exclusive purchasing; exclusive selling; buyer power; com-petition; vertical restraints;
    All these keywords.

    JEL classification:

    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts

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