Work

Direct sales and bargaining

Year: 2024

Type: article

Abstract: Cutting out the intermediary and selling directly to consumers is an increasingly common strategy by manufacturers. We develop a structural model of vertical relations where manufacturers bargain with retailers and sell their products directly to consumers. Direct sales generate potential consumer gains due to additional competition and product variety but also increase manufacturers' bargaining leverage, thereby increasing upstream and downstream prices and potentially reducing consumer welfare. We estimate the model using data from the outdoor advertising industry to quantify the bargaining‐leverage and welfare effects of direct sales. We discuss the relevance of the bargaining‐leverage effect for vertical merger evaluation.

Source: The RAND Journal of Economics

DOI: 10.1111/1756-2171.12480

Authors: Javier D. Donna, Pedro Pereira, Yun Pu, Andre Trindade, Renan C. Yoshida

Institutions: University of Miami, Autoridade da Concorrência, Southwestern University of Finance and Economics, Escola Brasileira de Economia e Finanças, NOVA School of Business and Economics, Stanford University

Language: English

Topic: Merger and Competition Analysis

Subfield: Economics and Econometrics

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: hybrid

Estimated APC paid: $3,400

OpenAlex ID: W4404759462

FWCI: 3.186

Cites: 63

Cited by: 10

Related to: 10