Edited by Emek Basker
Chapter 5: The economics of retailer–supplier pricing relationships: theory and evidence
This chapter surveys the literature on bilateral retailer-supplier pricing relations, with a focus on how they affect retail prices. The discussion brings together three strands of research that are usually discussed separately: the theory of pricing in vertically related oligopoly markets, the theory of price discrimination and buyer power in intermediate good markets, and the empirical analysis of retailer supplier relations. In the theoretical literature, retail prices are very sensitive to assumptions on the nature of retailer-supplier relations, including (1) whether suppliers can use vertical restraints, (2) market structure upstream and downstream, (3) whether the offers suppliers make to retailers are public or private, and (4) whether, and how, firms use nonlinear tariff structures. Theory has also found a number of factors that generate more bargaining power for retailers of greater size. The empirical literature is, as yet, relatively limited, partly because of the confidential nature of retailer–supplier pricing. It has studied the impacts of downstream market structure on retail prices, and the adverse effect on competition from the introduction of resale price maintenance. There is some evidence showing that large retailers secure lower prices from suppliers, particularly when the retailer has a choice of supplier.
You are not authenticated to view the full text of this chapter or article.
Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.
Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.
Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.