Upstream uncertainty and countervailing power.
We study vertical contracting through bargaining between an upstream supplier and downstream retailers. We consider the effect of supplier uncertainty as to final volumes on the efficient bargains struck. Uncertainty causes retail price effects: large buyers wield countervailing power (deliver lower...
| Main Authors: | , |
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| Format: | Journal article |
| Language: | English |
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Elsevier
2012
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| _version_ | 1826284423538016256 |
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| author | Smith, H Thanassoulis, J |
| author_facet | Smith, H Thanassoulis, J |
| author_sort | Smith, H |
| collection | OXFORD |
| description | We study vertical contracting through bargaining between an upstream supplier and downstream retailers. We consider the effect of supplier uncertainty as to final volumes on the efficient bargains struck. Uncertainty causes retail price effects: large buyers wield countervailing power (deliver lower retail prices) if upstream marginal costs are decreasing. If there were no upstream uncertainty, downstream retail prices would be independent of buyer size. With enough uncertainty large buyers have buyer power also (secure advantageous input prices). Downstream mergers, or organic growth of a downstream firm, change the uncertainty facing the upstream supplier and so result in "waterbed effects" on other buyers. We show that uncertainty for suppliers can be generated by upstream competition. |
| first_indexed | 2024-03-07T01:13:37Z |
| format | Journal article |
| id | oxford-uuid:8de41fcb-2a6e-4027-b1ae-2534a181e528 |
| institution | University of Oxford |
| language | English |
| last_indexed | 2024-03-07T01:13:37Z |
| publishDate | 2012 |
| publisher | Elsevier |
| record_format | dspace |
| spelling | oxford-uuid:8de41fcb-2a6e-4027-b1ae-2534a181e5282022-03-26T22:54:02ZUpstream uncertainty and countervailing power.Journal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:8de41fcb-2a6e-4027-b1ae-2534a181e528EnglishDepartment of Economics - ePrintsElsevier2012Smith, HThanassoulis, JWe study vertical contracting through bargaining between an upstream supplier and downstream retailers. We consider the effect of supplier uncertainty as to final volumes on the efficient bargains struck. Uncertainty causes retail price effects: large buyers wield countervailing power (deliver lower retail prices) if upstream marginal costs are decreasing. If there were no upstream uncertainty, downstream retail prices would be independent of buyer size. With enough uncertainty large buyers have buyer power also (secure advantageous input prices). Downstream mergers, or organic growth of a downstream firm, change the uncertainty facing the upstream supplier and so result in "waterbed effects" on other buyers. We show that uncertainty for suppliers can be generated by upstream competition. |
| spellingShingle | Smith, H Thanassoulis, J Upstream uncertainty and countervailing power. |
| title | Upstream uncertainty and countervailing power. |
| title_full | Upstream uncertainty and countervailing power. |
| title_fullStr | Upstream uncertainty and countervailing power. |
| title_full_unstemmed | Upstream uncertainty and countervailing power. |
| title_short | Upstream uncertainty and countervailing power. |
| title_sort | upstream uncertainty and countervailing power |
| work_keys_str_mv | AT smithh upstreamuncertaintyandcountervailingpower AT thanassoulisj upstreamuncertaintyandcountervailingpower |