An empirical analysis of countervailing power in business-to-business bargaining

Pricing schemes in business-to-business (B2B) relationships reflect price discrimination and bargaining over rents. Bargaining outcomes are determined by upstream market power and countervailing buyer power downstream. This paper uses an exceptional panel of B2B transactions in the UK brick market to study B2B transaction prices. The empirical analysis identifies three effects on prices: nonlinear volume and freight absorption effects; countervailing power effects arising from buyers' local commercial significance; and competition effects due to the buyers' local potential suppliers. And it shows that small buyers benefit more from competition than large buyers because they are not constrained by the suppliers' capacity

How Strong Buyers Spur Upstream Innovation

We challenge the view that the presence of powerful buyers stifles suppliers´ incentives to innovate. Following Katz (1987), we model buyer power as buyers´ ability to substitute away from a given supplier and isolate several effects that support the opposite view, namely that the presence of powerful buyers induces a supplier to invest more in cost reduction. In contrast in negotiations with smaller buyers, the outcome of negotiations with large buyers is fully determined by their more valuable alternative supply option. This increases the supplier´s incentives to reduce marginal costs, both as the supplier receives a larger fraction of the thereby generated incremental profits and as this makes buyers´ alternative supply option less valuable. The latter effect is due to downstraem competition between buyers and, as we show, is also stronger the larger and thus the more powerful buyers are

What Factors Determine the Number of Trading Partners?

The purpose of the paper is to provide a simple model explaining buyer-supplier relationships and show what factors determine the number of trading partners. We show that when the supplier is able to determine the number of trading partners, the optimal number is small if the supplier's bargaining power with them is weak, the economy of scope in the supplier's variable costs is significant, and that in its sunk investment is weak. Investment may be greater when the number of trading partners is small. The results may be consistent with the formation of Japanese buyer-supplier relations

Retransmission Consent, Network Ownership, and the Programming Decisions of Cable Operators

Using a discrete choice model and a dataset consisting of the 81 most carried cable networks and the programming decisions of a sample of cable franchises, this study found that networks owned by broadcasters are more likely to be carried than are independent networks. The results also show that this advantage decreases with the popularity and the age of the network and that networks owned by cable operators exhibited an even greater likelihood of being carried.

Vertical Ownership, Program Network Carriage, and Tier Positioning in Cable Television: An Empirical Study

Vertical integration, Cable television, Program carriage, Program positioning,