Buyer power and supplier incentives

摘要

This paper analyzes the origins and welfare consequences of buyer power. We show that ifsuppliers are capacity constrained or have strictly convex costs, there are two different channelsthrough which large buyers can obtain more favorable terms from their suppliers. In particular, weshow how the presence of large buyers can then erode the value of suppliers' outside option.Somewhat surprisingly, we show how this can induce suppliers to undertake strategies that lead tohigher output and potentially higher welfare.