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Hugo Molina (CREST) – "Buyer Alliances in Vertically Related Markets"
Time: 12:15 pm – 1:15 pm
Date: 10th of October 2017
Place: Room 3001.
Hugo Molina (CREST) – “Buyer Alliances in Vertically Related Markets”
Abstract: In many vertically related markets, retailers form alliances to purchase products from manufacturers. This paper first shows that theoretical predictions of effects resulting from buyer alliances are ambiguous. On the one hand, joining forces strengthens the bargaining position of retailers; on the other hand, alliances affect costs of making price concessions in negotiations to the benefit of manufacturers. Using household-level scanner data on bottled water purchases, I estimate a structural model of demand and supply. Based on conditional moment restrictions that approximate optimal instruments, my empirical approach differs from prior works in that I am able to identify firms’ bargaining power without observing wholesale prices in the vertical chain. I perform simulations to study the economic effects of three buyer alliances that have been formed by competing retailers in the French food retail sector. My results suggest that retailers’ bargaining power is weakened, price-cost margins of manufacturers increase by 2.80%, and final consumers face higher prices.
Laurent Davezies (CREST – ENSAE Paristech), Arne Uhlendorff (CREST – ENSAE Paristech) & Yannick Guyonvarch (CREST – ENSAE ParisTech)