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Pré-publication, Document de travail

Buyer power through producer's differentiation

Abstract : This paper shows that retailers may choose to offer products differentiated in quality to consumers, not to relax downstream competition, but to improve their buyer power in the negotiation with their supplier. We consider a simple vertical industry where two producers sell products differentiated in quality to two retailers who operate in separated markets. In the game, first retailers choose which product to carry, then each retailer and her chosen producer bargain over the terms of a two-part tariff contract and retailers finally choose the quantities. When upstream production costs are convex, the share of the total profits going to the retailer would be higher if they choose to differentiate. We thus isolate the wish to differentiate as "only" due to increasing buyer power: via producer's differentiation, the retailer gets a larger share of smaller total profits. This result also holds when retailers compete downstream. We derive the consequences of a differentiation induced by buyer power motives for consumer surplus.
Type de document :
Pré-publication, Document de travail
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https://hal.inrae.fr/hal-02820862
Déposant : Migration Prodinra <>
Soumis le : samedi 6 juin 2020 - 18:31:43
Dernière modification le : vendredi 12 juin 2020 - 10:43:26

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  • HAL Id : hal-02820862, version 1
  • PRODINRA : 9820

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Citation

Claire Chambolle, Sofia-Berto Villas-Boas. Buyer power through producer's differentiation. 2007. ⟨hal-02820862⟩

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