Buyer Group and Buyer Power When Sellers Compete

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 Shaffer, 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 find that the formation of a buyer group has no effect if each seller's 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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Replaced by

Doh-Shin Jeon, and Domenico Menicucci, “On the profitability of buyer groups when sellers compete”, Games and Economic Behavior, vol. 115, May 2019, pp. 265–288.

Reference

Doh-Shin Jeon, and Domenico Menicucci, “Buyer Group and Buyer Power When Sellers Compete”, TSE Working Paper, n. 14-543, November 26, 2014, revised November 2017.