Abstract:Abstract:We consider a model of vertical competition where downstream firms (retailers) purchase an upstream input from a monopolist and are able to differentiate from each other in terms of quality. Our primary focus is to study the effects of introducing a large retailer, such as a WalMart Supercenter, that is able to lower wholesale prices (i.e. buyer market power). We obtain two main results. First, the store with no buyer market power responds to the presence of the large retailer by increasing its qualit… Show more
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