The next Economics Seminar of Paris-Saclay will take place on Thursday, June 1 from 12h15 to 13h15. Clémence Christin (U. de Caen Normandie) will present “Buyer Power and Product Selection in Interlocking Relationships” (joint with Claire Chambolle and Hugo Molina)
We study a model of interlocking vertical relationships between manufacturers and retailers where the latter select which product(s) to distribute on the market. We highlight that the degree of substitution among retailers as well as their bargaining power vis-à-vis manufacturers play a critical role on retail assortments. When both are sufficiently weak, we show that at least one retailer has an incentive to restrict its assortment which decreases product variety and leads to higher prices for consumers. We also analyze the effect of downstream consolidation through buying groups and retail merger and derive policy implications.