The Formation And Effect Of Retailer’s Countervailing Power:the Role Of Consumer Preference

With the arising of one-stop shopping, large stores, "all in one" store and other retail organizations, the traditional relationships between suppliers and retailers changed dramatically, i.e., the dominated role is turned from the upstream into the downstream, the retailer’s ability against its supplier is called countervailing power. In recent years, the development of countervailing power theory brought a great shock to the traditional industrial organization theory, and also attracted quite a bit of attention from academia and regulatory. Many studies tried to reveal the source and effect of countervailing power, at the same time, the regulatory authorities also make some explorations and try to provide some basis for regulations. However, most of these studies focus on the characteristics of upstream and downstream firms, ignoring the role of consumer preference on countervailing power. In fact, as one of the central controller in the market, consumer preference plays a significant role in the allocation of social resources.We can see from the real industry, the changing of consumer preference, such as the changing of consumer loyalty, the changing of consumer’s taste towards retailer’s service, etc., is bound to carry some impact on retailer’s bargaining position, and thus to affect the retailer’s countervailing power. Actually, how to reveal the formation mechanism of countervailing power from the aspect of consumer preference is always a question worth to consider. Around this problem, we construct a market structure with monopoly supplier and oligopolistic retailers, and try to reveal the role of consumer preference in the formation mechanism of countervailing power by introducing the heterogeneity consumer preferences towards retailers. We also consider the economic effect of consumer and try to provide some proposals for regulatory authorities.The thesis is divided into six parts, namely, the introduction, the literature review, the formation of countervailing power in the case of quantity competition, the formation of countervailing power in the case of price competition, numerical simulation and extended analysis, and the last part is conclusions. Specifically, this thesis completes the research work in the following aspects:(1) Based on the extensive literatures about the traditional economic theory and industrial organization theory, we summarize and evaluate concept of consumer preference and countervailing power, the impact of consumer preference and countervailing power, and then summarize the direction and goals based on the significance of this thesis.(2) Based on the direction and goals, we study the trading conditions and transactions between the supplier and retailers to reveal the formation mechanism of countervailing power, by introducing the heterogeneity consumer preference in an M-O market structure. We also study the firms’ optimal strategies and market equilibrium conditions.(3) We make some numerical simulation further to verify the conclusions get from theoretical model, compare the equilibrium results under different competition modes. We also study the economic effects of consumer preference and the relationship between the consumer preference and countervailing power.