Buyer Power and Quality Improvements

  title={Buyer Power and Quality Improvements},
  author={Pierpaolo Battigalli and Chiara Fumagalli and Michele Polo Bocconi},
This paper analyses the sources of buyer power and its e¤ect on sellers’ investment in quality improvements. In our model retailers make takeit-or-leave-it o¤ers to a producer and each of them obtains its marginal contribution to total pro…ts (gross of sunk costs). In turn, this depends on the rivalry between retailers in the bargaining process. Rivalry increases when the retailers are less di¤erentiated and when decreasing returns to scale in production are larger. The allocation of total… CONTINUE READING
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