SFB 303 Discussion Paper No. A - 204

Author: Broecker, Thorsten
Title: Buyer Power and the Coordination of Demand in Bilateral Oligopolies with Price Competition
Abstract: In this paper, we analyze the demand of large quantities as a cause of buyer power of a firm. It is argued that an appropriate model is a bilateral oligopoly with price leadership on the suppliers' side. It is demonstrated that buyer power is a countervailing power to seller power. Large buyers can profitably coordinate their purchases over more than one period which a small buyer may not be able to do. We thereby also identify incentives for horizontal mergers on the demand side of the market for a homogeneous product.
Keywords: buyer power, seller power, bilateral oligopoly, Bertrand-Edgeworth competition, horizontal mergers
Creation-Date: October 1988
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