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BUYER POWER AND THE ‘WATERBED EFFECT’ *
Author(s) -
INDERST ROMAN,
VALLETTI TOMMASO M.
Publication year - 2011
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/j.1467-6451.2011.00443.x
Subject(s) - competitor analysis , downstream (manufacturing) , market power , business , strategic complements , economics , industrial organization , monetary economics , microeconomics , marketing , monopoly
When a buyer is able to obtain lower input prices from a supplier, is it possible that other buyers will have to pay more for the same input as a result? Is this bad for consumers? We present a model that analyzes the conditions under which the asymmetric exercise of buyer power can lead to consumer detriment through raising other buyers' wholesale prices (the ‘waterbed effect’).
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