We study how the formation of a buyer group affects buyer power when sellers compete and buyers operate in separate markets. Previous research (Inderst and Sha¤er, 2007, and Dana, 2012) has considered a buyer group that can commit to an exclusive purchase and has found that the formation of a buyer group strictly increases buyer power unless buyers have identical preferences. In contrast, we assume that no commitment to exclusive purchases is possible. We fi nd that the formation of a buyer group has no effect if each sellers cost function is concave. If it is strictly convex, the buyer group strictly reduces the buyers' total payoff as long as the Pareto-dominant equilibrium for sellers is played when a buyer group is formed.
On the Unprofitability of Buyer Groups When Sellers Compete / Doh-Shin Jeon; Domenico Menicucci. - In: GAMES AND ECONOMIC BEHAVIOR. - ISSN 0899-8256. - STAMPA. - 115:(2019), pp. 265-288. [10.1016/j.geb.2019.03.008]
On the Unprofitability of Buyer Groups When Sellers Compete
Doh-Shin Jeon;Domenico Menicucci
2019
Abstract
We study how the formation of a buyer group affects buyer power when sellers compete and buyers operate in separate markets. Previous research (Inderst and Sha¤er, 2007, and Dana, 2012) has considered a buyer group that can commit to an exclusive purchase and has found that the formation of a buyer group strictly increases buyer power unless buyers have identical preferences. In contrast, we assume that no commitment to exclusive purchases is possible. We fi nd that the formation of a buyer group has no effect if each sellers cost function is concave. If it is strictly convex, the buyer group strictly reduces the buyers' total payoff as long as the Pareto-dominant equilibrium for sellers is played when a buyer group is formed.
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