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Buyer Power and Supplier Incentives

Discussion Papers 464, 27 S.

Roman Inderst, Christian Wey

2005. Jan.

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Published in: European Economic Review 51 (2007) 3, 647-667


This paper argues that - in contrast to an often expressed view - the formation of larger and more powerful buyers need not reduce welfare by stifling suppliers' incentives. If contracts are determined in bilateral negotiations, the presence of larger buyers may both increase suppliers' incentives for product improvement and induce suppliers to choose a more efficient technology. The paper also isolates two different channels by which larger buyers can obtain a discount.

Keywords: Buyer power; Merger; Retailing
Frei zugängliche Version: (econstor)