A Dynamic Theory of Countervailing Power

Snyder, Christopher M.

doi:10.2307/2555880

Cited by 208 publications

(127 citation statements)

References 19 publications

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“…One issue of interest is the analysis of the exact channel through which buyer groups obtain better conditions in procurements (see Ruffle, 2009, for a survey). In Snyder (1996), large buyer groups are able to obtain better purchasing conditions because, in a repeated game, periods of high demand (booms) are more prone to price wars since today's demand is high relative to future demand. See Ruffle (2013) for an experimental analysis of the same setup.…”

Section: Literaturementioning

confidence: 99%

Do buyer groups facilitate collusion?

Normann

Rösch

Schultz

2015

Journal of Economic Behavior & Organization

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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. Terms of use: Documents in AbstractWe explore whether lawful cooperation in buyer groups facilitates collusion in the product market. Buyer groups purchase inputs more economically. In a repeated game, abandoning the buyer group altogether or excluding single firms constitute credible threats. Hence, in theory, buyer groups facilitate collusion. We run several experimental treatments using three-firm Cournot markets to test these predictions and other effects like how buyer groups affect outcomes when group members can communicate.The experimental results show that buyer groups lead to lower outputs when groups can exclude single firms. Communication is often abused for explicit agreements and this strongly reduces competition.JEL Classification: C7, C9, L4, L41

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Section: Literaturementioning

confidence: 99%

Do buyer groups facilitate collusion?

Normann

Rösch

Schultz

2015

Journal of Economic Behavior & Organization

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“…When the supplier has increasing unit costs, buyer groups can capture a larger share of surplus than individual consumers do. In a multiple seller/multiple buyer setting, Snyder (1996Snyder ( , 1998 shows that, as the size of a buyer increases, sellers' ability to tacitly coordinate on price decreases, which leads to lower average prices. There is some reason to doubt that sheer size, as opposed to the ability to move business among suppliers, is the source of a GPO's low prices.…”

Section: Group Purchasing and Nonlinear Tariffs In Economicsmentioning

confidence: 99%

Group purchasing, nonlinear tariffs, and oligopoly

Marvel

Yang

2008

International Journal of Industrial Organization

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Loyalty discounts are nonlinear tariffs that condition rebates or marginal prices on meeting aggregate purchase or market share targets. These discounts are widespread, and are often the impetus for consumers to form buying groups, or group purchase organizations (GPOs). This paper models the competitive effects of the introduction of a GPO into a market within which the preferences of the GPO's members are horizontally differentiated. While nonlinear tariffs are an effective way for a monopolist to extract consumer surplus, when two suppliers compete using such schedules, the results are far more competitive in comparison to simple Bertrand-Nash competition with linear tariffs. This result holds when the product of each of the suppliers is attractive to a substantial portion of consumers. In our model, the nonlinear schedule puts all customers "in play" to a degree that contrasts sharply with the competition at the margin characteristic of constant per unit prices. Moreover, competing in nonlinear tariffs removes allocative inefficiency that can result from single price competition.

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“…2 Explanations for sources of buyer power include retailers' capacity to integrate backwards (Katz, 1987), to sponsor entry upstream (Inderst and Shaffer, 2007), to thwart collusion by suppliers (Snyder, 1996(Snyder, , 1998, to engage in multiple sourcing (Inderst, 2007), their position as 'gatekeeper' retailers (Majumdar, 2006), explanations related to economic dependancy (OECD, 1998) and buyers' sophistication (Nordemann, 1995).…”

Section: Introductionmentioning

confidence: 99%

Cartelization Through Buyer Groups

Doyle¹,

Han

2013

Rev Ind Organ

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Retailers may enjoy stable cartel rents in their output market through the formation of a buyer group in their input market. A buyer group allows retailers to credibly commit to increased input prices, which serve to reduce combined final output to the monopoly level; increased input costs are then refunded from suppliers to retailers through slotting allowances or rebates. The stability of such an "implied cartel" depends on the retailers' incentives to secretly source from a supplier outside of the buyer group arrangement at lower input prices. Cheating is limited if retailers sign exclusive dealing or minimum purchase provisions. We discuss the relevancy of our findings for antitrust policy.

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A Dynamic Theory of Countervailing Power

Cited by 208 publications

References 19 publications

Do buyer groups facilitate collusion?

Do buyer groups facilitate collusion?

Group purchasing, nonlinear tariffs, and oligopoly

Cartelization Through Buyer Groups

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