Working paper

Buyer Group and Buyer Power When Sellers Compete

Doh-Shin Jeon, and Domenico Menicucci

Abstract

We study how the formation of a buyer group affects buyer power when sellers compete and buyers operate in separate markets. Previous research (Inderst and Shaffer, 2007, and Dana, 2012) has considered a buyer group that can commit to an exclusive purchase and has found that the formation of a buyer group strictly increases buyer power unless buyers have identical preferences. In contrast, we assume that no commitment to exclusive purchases is possible. We find that the formation of a buyer group has no effect if each seller's cost function is concave. If it is strictly convex, the buyer group strictly reduces the buyers'total payoff as long as the Pareto-dominant equilibrium for sellers is played when a buyer group is formed.

Keywords

Buyer Group; Buyer Power; Competition in Non-linear Tariffs; Discriminatory Offers; Common Agency;

JEL codes

  • D4: Market Structure and Pricing
  • K21: Antitrust Law
  • L41: Monopolization • Horizontal Anticompetitive Practices
  • L82: Entertainment • Media

Replaced by

Doh-Shin Jeon, and Domenico Menicucci, On the profitability of buyer groups when sellers compete, Games and Economic Behavior, vol. 115, May 2019, pp. 265–288.

Reference

Doh-Shin Jeon, and Domenico Menicucci, Buyer Group and Buyer Power When Sellers Compete, TSE Working Paper, n. 14-543, November 26, 2014, revised November 2017.

See also

Published in

TSE Working Paper, n. 14-543, November 26, 2014, revised November 2017