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Purchasing alliances and product variety

Author

Listed:
  • Marie-Laure Allain

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique)

  • Rémi Avignon

    (CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - CNRS - Centre National de la Recherche Scientifique)

  • Claire Chambolle

    (ALISS - Alimentation et sciences sociales - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement)

Abstract
We analyze the impact of purchasing alliances on product variety and profit sharing in a setting, in which capacity constrained retailers operate in separated markets and select their assortment in a set of differentiated products offered by heterogeneous suppliers (multinationals vs. local SMEs). Retailers may either have independent listing strategies or build a buying group, thereby committing to a joint listing strategy. This alliance may cover the whole product line (full buying group) or only the products of large suppliers (partial buying group). We show that a buying group may enhance the retailers' buyer power and reduce the overall product variety to the detriment of consumers. Our most striking result is that partial buying groups do not protect the small suppliers from being excluded or from bearing profit losses; they may even be more profitable for retailers than full buying groups.

Suggested Citation

  • Marie-Laure Allain & Rémi Avignon & Claire Chambolle, 2020. "Purchasing alliances and product variety," Post-Print hal-03341448, HAL.
    • Handle: RePEc:hal:journl:hal-03341448
    DOI: 10.1016/j.ijindorg.2020.102641
    Note: View the original document on HAL open archive server: https://hal.science/hal-03341448
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    Cited by:

    1. Marie-Laure Allain & Rémi Avignon & Claire Chambolle & Hugo Molina, 2022. "Buying groups formation: what effects on competition in the retail industry? [Les centrales d’achat : quels enjeux de concurrence ?]," Working Papers halshs-03693375, HAL.
    2. Marie-Laure Allain & Rémi Avignon & Claire Chambolle & Hugo Molina, 2022. "Buying groups formation: what effects on competition in the retail industry? [Formation des groupements d'achat : quels effets sur la concurrence dans le commerce de détail ?]," Working Papers halshs-03693440, HAL.
    3. Gianluca Antonecchia & Ajay Bhaskarabhatla & Enrico Pennings, 2024. "Bargaining Power and Quantity Discounts to Retailers: Evidence from India’s Pharmaceutical Industry," Tinbergen Institute Discussion Papers 24-048/VII, Tinbergen Institute.
    4. Marie-Laure Allain & Rémi Avignon & Claire Chambolle & Hugo Molina, 2022. "Buying groups formation: what effects on competition in the retail industry?," Post-Print halshs-03693440, HAL.
    5. Jianyu Yu & Olivier Bonroy & Zohra Bouamra‐Mechemache, 2023. "Quality and quantity incentives under downstream contracts: A role for agricultural cooperatives?," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(4), pages 1176-1196, August.
    6. Hugo Molina, 2024. "Buyer Alliances in Vertically Related Markets," Working Papers hal-03340176, HAL.

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    More about this item

    Keywords

    Vertical relations; Purchasing alliance; Buying group; Buyer power; Vertical foreclosure;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L42 - Industrial Organization - - Antitrust Issues and Policies - - - Vertical Restraints; Resale Price Maintenance; Quantity Discounts
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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