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Vertical contracting and countervailing power

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Valletti 2010-10.pdfWorking Paper737.18 kBAdobe PDFView/Open
American Economic Journal Microeconomics_6_3_2014.pdfAccepted version369.07 kBAdobe PDFView/Open
Title: Vertical contracting and countervailing power
Authors: Iozzi, A
Valletti, T
Item Type: Journal Article
Abstract: We study a set of bilateral Nash bargaining problems between an upstream input supplier and several differentiated but competing retailers. If one bilateral bargain fails, the supplier can sell to the other retailers. We show that, in a disagreement, the other retailers' behavior has a dramatic impact on the supplier's outside options and, therefore, on input prices and welfare. We revisit the countervailing buyer power hypothesis and obtain results in stark contrast with previous findings, depending on the type of outside option. Our results apply, more generally, to the literature that incorporates negotiated input prices using bilateral Nash bargaining.
Issue Date: 3-Aug-2014
Date of Acceptance: 1-Aug-2014
URI: http://hdl.handle.net/10044/1/5958
Publisher Link: http://www3.imperial.ac.uk/business-school/research/publications/discussion_papers/valletti%202010-10
DOI: 10.25561/5958
ISSN: 1945-7669
Publisher: American Economic Association
Start Page: 106
End Page: 135
Journal / Book Title: American Economic Journal: Microeconomics
Volume: 6
Issue: 3
Replaces: 10044/1/19507
Copyright Statement: © The authors
Sponsor/Funder: Economic & Social Research Council (ESRC)
Funder's Grant Number: ES/H003975/1
Keywords: Social Sciences
Business & Economics
Countervailing buyer power
Nash bargaining
Countervailing buyer power
Nash bargaining.
14 Economics
Publication Status: Published
Appears in Collections:Imperial College Business School