The Countervailing Power Hypothesis when Dominant Retailers Function as Sales Promoters

Abstract

We consider a downstream oligopoly model with one dominant and several fringe retailers who purchase a manufacturing product from a monopoly supplier. We then examine how the suppliers disagreement payoff influences the relation between the dominant retailers bargaining power and the equilibrium retail price. If the market demand shrinks due to a breakdown in bargaining between the supplier and the dominant retailer, who works as a sales promoter for the product, there is a negative relation between the bargaining power and the retail price. We also find that an increase in the number of fringe retailers is more likely to increase the retail price if their number is large.

The Influence of Buyer Power on Supply Chain Pricing with Downstream Competition

“…Christou and Papadopoulos also extended Chen's model, and found that the role of buyer power is neutral, neither playing a role in raising the price nor lowering it [4,40]. Matsushima and Yoshida introduced the promotion of the leading retailer, further expanding Chen's model, and claimed that an increase in buyer power would reduce the retail price [4,41]. Chen et al found that buyer power would reduce retail price and improve social welfare.…”