*We thank Paul Dobson, Adrian Majumdar, the Editor and two anonymous referees for very helpful comments and discussions. Support from ESRC grant RES-062-23-2099 is gratefully acknowledged.
BUYER POWER AND THE ‘WATERBED EFFECT’*
Article first published online: 23 MAR 2011
© 2011 The Authors. The Journal of Industrial Economics © 2011 Blackwell Publishing Ltd and the Editorial Board of The Journal of Industrial Economics
The Journal of Industrial Economics
Volume 59, Issue 1, pages 1–20, March 2011
How to Cite
INDERST, R. and VALLETTI, T. M. (2011), BUYER POWER AND THE ‘WATERBED EFFECT’. The Journal of Industrial Economics, 59: 1–20. doi: 10.1111/j.1467-6451.2011.00443.x
- Issue published online: 23 MAR 2011
- Article first published online: 23 MAR 2011
When a buyer is able to obtain lower input prices from a supplier, is it possible that other buyers will have to pay more for the same input as a result? Is this bad for consumers? We present a model that analyzes the conditions under which the asymmetric exercise of buyer power can lead to consumer detriment through raising other buyers' wholesale prices (the ‘waterbed effect’).