Purchasing alliances and product variety

Abstract

We analyze the impact of purchasing alliances on product variety and profit sharing in a setting, in which capacity constrained retailers operate in separated markets and select their assortment in a set of differentiated products offered by heterogeneous suppliers (multinationals vs. local SMEs). Retailers may either have independent listing strategies or build a buying group, thereby committing to a joint listing strategy. This alliance may cover the whole product line (full buying group) or only the products of large suppliers (partial buying group). We show that a buying group may enhance the retailers' buyer power and reduce the overall product variety to the detriment of consumers. Our most striking result is that partial buying groups do not protect the small suppliers from being excluded or from bearing profit losses; they may even be more profitable for retailers than full buying groups.

Pricing and Coordination in a Dual-Channel Supply Chain With Product Variety Under the Countervailing Power of the Retailer

“…Their research has developed a risk sharing contract of the supply chain to alleviate price volatility and demand uncertainty in the global business environment. Allain [20] finds that the buying group enhances the countervailing power of the retailer and reduces the product variety. The retailers are even more profitable than full buying groups.…”

Buyer Alliances in Vertically Related Markets

“…4,5 A recent stream of the literature has also found that the ability of a buyer alliance to coordinate the purchasing policy of its members is an important source of countervailing buyer power. For instance, an alliance can heighten upstream competition by reducing the number of manufacturers to deal with (Inderst and Shaffer, 2007;Dana, 2012;Chen and Li, 2013;Allain, Avignon and Chambolle, 2020), 6 improve the status quo position of retailers by engaging in negotiations with multiple manufacturers (Chae and Heidhues, 2004a), or increase the outside option of retailers when dealing with a powerful manufacturer (Caprice and Rey, 2015). My contribution to this line of research 3 A buyer alliance generates a nondiscrimination effect when its members obtain similar trading terms for the purchase of a national brand.…”

Quality and quantity incentives under downstream contracts: A role for agricultural cooperatives?

“…Although earlier works have focused on the stylized market structure, with an upstream firm dealing with several downstream firms (McAfee & Schwartz, 1994;O'Brien & Shaffer, 1992;Rey & Vergé, 2004), some recent works have investigated more complex structures, with multiple upstream firms dealing with multiple downstream firms (Collard-Wexler et al 2019;Rey et al, 2019). The contract structure varies from nonlinear contracts, mostly in the form of linear tariffs (O'Brien & Shaffer, 1992;Rey & Vergé, 2004), to a linear form (Gaudin, 2019); the contracting term involves the control over supply quantities (Rey & Vergé, 2004) or varieties (Allain et al 2020).…”