Buyer Power and Information Sharing

We examine how buyer power affects the incentives of producers to share information with retailers. First, we develop a theoretical model suggesting that increasing buyer power will discourage information sharing between producers and retailers. Second, we test this prediction by adopting the idea t...

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Bibliographic Details
Published in:Seoul journal of economics 2022, 35(3), , pp.261-290
Main Authors: Kim, In Kyung, Nora, Vladyslav
Format: Article
Language:English
Subjects:
Bargaining
Buyers
Chain stores
Consumers
Incentives
Information communication
Information sharing
Investigations
Power
Prices
Profits
Retail stores
Sales
Suppliers
Supply chains
경제학
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Summary:We examine how buyer power affects the incentives of producers to share information with retailers. First, we develop a theoretical model suggesting that increasing buyer power will discourage information sharing between producers and retailers. Second, we test this prediction by adopting the idea that recommended retail prices (RPRs) serve as an information-sharing device between manufacturers and retailers. Using manually collected information on RPRs for certain grocery products in Korea, we find that the more the sales of a product rely on powerful retailers, the less likely manufacturers will recommend prices. As revealing information can increase industry profits, our analysis highlights potential inefficiencies from the rise of powerful retailers.
ISSN:1225-0279
DOI:10.22904/sje.2022.35.3.003