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The Countervailing Power Hypothesis when Dominant Retailers Function as Sales Promoters
Author(s) -
Matsushima Noriaki,
Yoshida Shohei
Publication year - 2018
Publication title -
the manchester school
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.361
H-Index - 42
eISSN - 1467-9957
pISSN - 1463-6786
DOI - 10.1111/manc.12221
Subject(s) - oligopoly , monopoly , microeconomics , bargaining power , economics , product (mathematics) , market power , function (biology) , power (physics) , stochastic game , industrial organization , cournot competition , physics , geometry , mathematics , quantum mechanics , evolutionary biology , biology
We consider a downstream oligopoly model with one dominant and several fringe retailers who purchase a manufacturing product from a monopoly supplier. We then examine how the supplier's disagreement payoff influences the relation between the dominant retailer's bargaining power and the equilibrium retail price. If the market demand shrinks due to a breakdown in bargaining between the supplier and the dominant retailer, who works as a sales promoter for the product, there is a negative relation between the bargaining power and the retail price. We also find that an increase in the number of fringe retailers is more likely to increase the retail price if their number is large.