Faculty of Economics and Business Administration Publications Database

Buyer Power and the Waterbed Effect

Valletti, Tommaso
Volume: 59
Number: 1
Pages: 1 - 20
Month: March
ISSN-Print: 0022-1821
Link External Source: Online Version
Year: 2011
Abstract: 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’).