We analyze a model of vertical differentiation in which retailers compete in product lines and may purchase a high quality good from a monopolist. The low quality good is produced by a competitive fringe. Depending on quality and cost differentials, the product lines chosen by retailers in equilibrium are either identical, completely different or partially overlapping. In the absence of upstream market power, the unique equilibrium is for retailers to offer identical product lines. Product line differentiation emerges as a result of strategic effects.

Rey and Tirole [Handbook of Industrial Organization. Amsterdam: Elsevier (2005)] considered a model in which a monopolist sells to downstream firms using nonlinear contracts. They showed that banning price discrimination fully restores the supplier’s ability to leverage its monopoly power by enabling it to commit not to offer side discounts. I show that the situation changes when the supplier competes against a fringe of less efficient rivals rather than being a monopolist. Then banning price discrimination may cause per-unit prices to fall and welfare to increase. The dominant supplier can take advantage of a strategic bargaining effect: reducing the per-unit price makes the outside option of buying from the fringe less profitable, allowing the dominant supplier to extract more bargaining surplus through the fixed fee. Copyright Springer 2006bargaining effect, bilateral oligopoly, price discrimination, vertical contracting, K21, L13, L42,

We consider a model of vertically related markets, in which an upstream firm faces a competitive fringe of less efficient suppliers and negotiates with customers that compete in a downstream market. We allow downstream firms to form a buyer group which selects suppliers on behalf of its members. We show that transforming individual listing decisions into a joint listing decision makes delisting less harmful for a group member, which in turn enhances the group members’ bargaining position at the expense of the upstream firm. We also discuss the implication for upstream investment incentives.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The working papers published in the Series constitute work in progress circulated to stimulate discussion and critical comments. Views expressed represent exclusively the authors' own opinions and do not necessarily reflect those of the editor. Terms of use: Documents in May 2012Abstract Consumers increasingly prefer to bundle their purchases into a single shopping trip, inducing complementaries between initially independent or substitutable goods. Taking this one-stop shopping behavior into account, we show that slotting fees may emerge as a result of a rent-shifting mechanism in a three-party negotiation framework, where a monopolistic retailer negotiates sequentially with two suppliers about two-part tari¤ contracts. If the goods are initially independent or su¢ ciently di¤erentiated, the wholesale price negotiated with the …rst supplier is upward distorted. This allows the retailer and the …rst supplier to extract rent from the second supplier. To compensate the retailer for the higher wholesale price, the …rst supplier pays a slotting fee as long as its bargaining power vis-à-vis the retailer is not too large. JEL-Classi…cation: L22, L42

[eng] Vertical relationships between manufacturers and retailers: determinants and consequences of the buying power - For many years now, relationships between retailers and manufacturers have always been tense and some of the strategies denounced as abusive. This raises doubts regarding the effectiveness of numerous laws (Royer, Raffarin, Galland) supposed to restrain the increasing power of retailers. Before passing laws, an accurate analysis of the relationships between manufacturers and retailers seems to be necessary. The first part of this paper recalls the basis of retailers' buying power emphasizing merger waves and private labels invasion. The second part looks at the impact of that buying power with respect to the contracts between the upstream firms and the downstream ones and tackles the efficiency of the laws passed to contain retailers' power. [fre] On assiste depuis de nombreuses années à la dénonciation des pratiques de la grande distribution à l'égard de ses fournisseurs, au point que l'on peut douter de la pertinence des nombreuses lois (Royer, Raffarin, Galland) censées limiter le pouvoir croissant des distributeurs. Une analyse plus fine des relations « producteurs- distributeurs » semble nécessaire avant de légiférer. La première partie de l'article revient sur les fondements de la puissance d'achat des distributeurs en mettant l'accent sur les mouvements de concentration et le développement des marques de distributeurs. La seconde partie regarde l'impact de cette puissance d'achat sur les relations contractuelles entre l'amont et l'aval en s'interrogeant sur l'efficacité des différentes mesures qui ont été prises afin de limiter le pouvoir des distributeurs.