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Upstream uncertainty and countervailing power.

Abstract:

We study vertical contracting through bargaining between an upstream supplier and downstream retailers. We consider the effect of supplier uncertainty as to final volumes on the efficient bargains struck. Uncertainty causes retail price effects: large buyers wield countervailing power (deliver lower retail prices) if upstream marginal costs are decreasing. If there were no upstream uncertainty, downstream retail prices would be independent of buyer size. With enough uncertainty large buyers h...

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Authors


Howard Smith More by this author
John Thanassoulis More by this author
Journal:
International Journal of Industrial Organization
Volume:
30
Issue:
6
Publication date:
2012-11-05
DOI:
URN:
uuid:8de41fcb-2a6e-4027-b1ae-2534a181e528
Local pid:
oai:economics.ouls.ox.ac.uk:15451
Language:
English

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