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Treatment of Buyer Power* Roman Inderst University of Frankfurt (IMFS) LSE * details in:

Treatment of Buyer Power* Roman Inderst University of Frankfurt (IMFS) LSE * details in: Inderst/Shaffer & Inderst/Mazzarotto in ABA HBs Doyle/Inderst (ECLR 06), Dobson/Inderst (ECLR 07) Inderst/Wey WuW … plus academic papers  http://personal.lse.ac.uk/inderst/. The Framework of Analysis.

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Treatment of Buyer Power* Roman Inderst University of Frankfurt (IMFS) LSE * details in:

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  1. Treatment of Buyer Power*Roman InderstUniversity of Frankfurt (IMFS)LSE * details in: Inderst/Shaffer & Inderst/Mazzarotto in ABA HBsDoyle/Inderst (ECLR 06), Dobson/Inderst (ECLR 07) Inderst/Wey WuW … plus academic papers http://personal.lse.ac.uk/inderst/

  2. The Framework of Analysis • Monopsonistic / “Market Interface” perspective BP exercised through withholding demand • Bargaining perspective BP targeted at individual discount

  3. Measures of Buyer Power • “Raw size” should not matter itself, but may enhance buyer’s outside option (sophistication, switching etc.) • BP through affecting supplier’s outside option • Controlling (potential) market: Gatekeeping • Economic dependency

  4. Measures of Buyer Power (cont.) • Careful: More generally, total inflicted loss should matterOECD (1998): “... E.g. Retailer A has buyer power over Supplier B if a decision to delist B’s product could cause A’s profit to decline by 0.1 per cent and B’s to decline by 10 percent.” • Threshold for market/buyer power? Can not be guided by presumption of clear link between BP and harm

  5. Consequences of BP / Potential Harm • Short-run impact on own retail prices Pass-through? (Competition, contracts, etc.) • Effect on competing buyers? • Exit / “Spiral”? • “Waterbed effect”? Or “Me too” effect?

  6. Implications for the Upstream Market • Consolidation. • Reduction in incentives to invest/innovate (Hold-up)But: • Large/dominant buyers may mitigate underlying contractual problems. • For more “incremental investments” it is also incremental profits and not absolute profits that are decisive.

  7. Buyer Power as Merger Defence • So far focused more on potential harm • Procurement “efficiencies” ? Contracts/Pass-through? Specific? Harm? • Countervailing Power Broad “Shield”? Coalescing Power?

  8. “Open/Interesting Issues” ? Focus: Grocery industry • “Vertical competition” (Steiner) • “Triple Play”: Retailers as • Customers • Sellers (shelf space) • Competitors (PLs)

  9. Notes on the Treatment of Buyer Power in Antitrust*Roman InderstUniversity of Frankfurt (IMFS)LSE * details in: Inderst/Shaffer & Inderst/Mazzarotto in ABA HBsDoyle/Inderst (ECLR 06), Dobson/Inderst (ECLR 07) Inderst/Wey WuW … plus academic papers  http://personal.lse.ac.uk/inderst/

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