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One‐Stop Shopping Behavior, Buyer Power and Upstream Merger Incentives
Author(s) -
Baye Irina,
von Schlippenbach Vanessa,
Wey Christian
Publication year - 2018
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/joie.12160
Subject(s) - incentive , upstream (networking) , bargaining power , microeconomics , business , bargaining problem , industrial organization , power (physics) , nash equilibrium , economics , computer science , physics , quantum mechanics , computer network
We analyze how consumer preferences for one‐stop shopping affect the (Nash) bargaining relationships between a retailer and its suppliers. One‐stop shopping preferences create ‘demand complementarities’ among otherwise independent products which lead to two opposing effects on upstream merger incentives: first a standard double mark‐up problem and second a bargaining effect. The former creates merger incentives while the later induces suppliers to bargain separately. When buyer power becomes large enough, then suppliers stay separated which raises final good prices. We also show that our result can be obtained when wholesale prices are determined in a non‐cooperative game and under two‐part tariffs.