Countervailing power revisited

Ungern‐Sternberg, Thomas von

doi:10.1016/0167-7187(95)00488-2

Cited by 154 publications

(91 citation statements)

References 5 publications

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“…Negotiated input prices have been previously studied in Horn and Wolinsky (1988a), von Ungern-Sternberg (1996), and Dobson and Waterson (1997). The differences between these papers and our contribution are manyfold.…”

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confidence: 49%

Bargaining, Mergers, and Technology Choice in Bilaterally Oligopolistic Industries

Inderst¹,

Wey²

2003

The RAND Journal of Economics

218

197

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Bargaining, Mergers, and Technology Choice in Bilaterally Oligopolistic Industries by Roman Inderst and Christian WeyThis paper provides a conceptual framework of multilateral bargaining in a bilaterally oligopolistic industry to analyze the motivations for horizontal mergers, technology choice, and their welfare implications. We first analyze the implication of market structure for the distribution of industry profits. We find that retailer mergers are more likely (less likely) if suppliers have increasing (decreasing) unit costs, while supplier mergers are more likely (less likely) if goods are substitutes (complements). In a second step we explore how market structure affects suppliers' technology choice, which reflects a trade-off between inframarginal and marginal production costs. We find that suppliers focus more on marginal cost reduction if (i) retailers are integrated and (ii) suppliers are non-integrated.In a final step we consider the whole picture where both market structure and (subsequent) technology choice are endogenous. Analyzing the equilibrium market structure, we find cases where retailers become integrated to induce suppliers to choose a more efficient technology, even though integration weakens their bargaining position. In this case the merger benefits all parties, i.e., suppliers, retailers, and even consumers. However, we also show that the equilibrium market structure does often not maximize welfare. Keywords

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confidence: 49%

Bargaining, Mergers, and Technology Choice in Bilaterally Oligopolistic Industries

Inderst¹,

Wey²

2003

The RAND Journal of Economics

218

197

View full text Add to dashboard Cite

show abstract

“…This paper contributes directly to the understanding of countervailing buyer power, a phenomenon originally identified by Galbraith (1952). Formalizations are more recent though, starting with von Ungern-Sternberg (1996) in a Cournot model with Reaction, and Dobson and Waterson (1997) who study Bertrand competition with differentiated products and with Reaction.…”

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confidence: 99%

Vertical Bargaining and Countervailing Power

Iozzi

Valletti

2010

SSRN Journal

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We study the existence of countervailing buyer power in a vertical industry where the input price is set via Nash bargainings between one upstream supplier and many differentiated but competing retailers. In case one bilateral bargaining fails, the supplier still has the ability to sell to the other retailers. We show that the capacity of these other retailers to react in the final market has a dramatic impact on the supplier's outside options and, ultimately, on input prices and welfare. Under downstream quantity competition, we find either no or opposite support to the hypothesis of countervailing power on input prices, as the retail industry becomes more concentrated. With price competition, we find a case for countervailing power, but its existence depends on the degree of product differentiation and on the ability of competing retailers to react to a disagreement. JEL Numbers: L50

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“…26,27 The results are reported in Column (1) of Table 1. 25 Looking at the years from 2008-2009 on, there are significant jumps and variations. Part of this variation is due to composition effects.…”

Section: Empirical Specification and Resultsmentioning

confidence: 99%

“…We therefore focus on the period between January 2003 and and December 2007. 25 This makes it possible to compare the development in the price series in the years leading up to the merger with development after the merger, without having to take into account changes and shifts in the price series occurring several years before or after the merger, which are unlikely to be directly related to the merger.…”

Section: Empirical Specification and Resultsmentioning

confidence: 99%

Upstream Merger in a Successive Oligopoly: Who Pays the Price?

2013

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This study develops and uses a successive oligopoly model, with an unobservable non-linear tariff between upstream and downstream firms, to analyze the possible anti-competitive effects of an upstream merger. We find that an upstream merger may lead to higher average prices paid by downstream firms, but that there is no change in the prices paid by consumers. The model is tested empirically on data for an upstream merger in the Norwegian food sector (specifically, the market for eggs). Consistent with the theoretical predictions of the model, we find that the merger had no effect on consumer prices, but led to higher average prices from the downstream to the upstream firm.

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Countervailing power revisited

Cited by 154 publications

References 5 publications

Bargaining, Mergers, and Technology Choice in Bilaterally Oligopolistic Industries

Bargaining, Mergers, and Technology Choice in Bilaterally Oligopolistic Industries

Vertical Bargaining and Countervailing Power

Upstream Merger in a Successive Oligopoly: Who Pays the Price?

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