Document de travail

On the countervailing power of large retailers when shopping costs matter

Stéphane Caprice et Shiva Shekhar

Résumé

We consider a set-up with vertical contracting between a supplier and a retail industry where a large retailer competes with smaller retailers that carry a narrower range of products. Consumers are heterogeneous in their shopping costs; they will either be multistop shoppers or one-stop shoppers. The countervailing power of the large retailer is modeled as a threat of demand-side substitution. We show that retail prices are higher, and industry surplus and social welfare fall, when the large retailer possesses countervailing power. Increasing marginal wholesale prices discourages multistop shopping behavior of consumers, making demand substitution less attractive for the large retailer.

Mots-clés

countervailing power; buyer power; polarization of the retail industry; shopping costs;

Codes JEL

  • D43: Oligopoly and Other Forms of Market Imperfection
  • L13: Oligopoly and Other Imperfect Markets
  • L40: General
  • L81: Retail and Wholesale Trade • e-Commerce

Référence

Stéphane Caprice et Shiva Shekhar, « On the countervailing power of large retailers when shopping costs matter », TSE Working Paper, n° 17-771, mars 2017.

Voir aussi

Publié dans

TSE Working Paper, n° 17-771, mars 2017