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Chris Doyle
''Small buyers''
( 2011, Vol. 31 No.1 )
We develop a model of retail competition and negotiations with an upstream supplier for several firms of different sizes. Contrary to existing thinking, we demonstrate that the larger a buyer the less countervailing power he possesses over the supplier. The reason for this is that a buyer's outside option - the ability to integrate backwards - becomes proportionately weaker as he grows in size as self-production is characterised by diseconomies of scale.
Keywords: Buyer power, countervailing power
JEL: L4 - Antitrust Issues and Policies: General
L1 - Market Structure, Firm Strategy, and Market Performance: General
Manuscript Received : Jan 02 2011 Manuscript Accepted : Feb 03 2011

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