Vertical Bargaining and Retail Competition: What Drives Countervailing Power?

Authors


  • This article has been accepted for publication and undergone full peer review but has not been through the copyediting, typesetting, pagination and proofreading process, which may lead to differences between this version and the Version of Record. Please cite this article as doi: 10.1111/ecoj.12506

Abstract

This paper investigates the effects of changes in market concentration on the equilibrium prices in a supply chain. Results are derived from a theoretical model of bilateral bargaining between upstream and downstream firms which allows for general forms of demand and retail competition. Whether countervailing buyer power arises, in the form of lower input prices following greater concentration downstream, depends on the pass-through rate of input prices to retail prices. Countervailing buyer power generally does not translate into lower retail prices because of heightened market power at the retail level.

This article is protected by copyright. All rights reserved.

Ancillary