Review of Behavioral Economics > Vol 5 > Issue 2

The Limits of Buyer Power: Experimental Evidence

Lisa Bruttel, University of Potsdam, Germany, lisa.bruttel@uni-potsdam.de
 
Suggested Citation
Lisa Bruttel (2018), "The Limits of Buyer Power: Experimental Evidence", Review of Behavioral Economics: Vol. 5: No. 2, pp 149-167. http://dx.doi.org/10.1561/105.00000082

Published: 13 Sep 2018
© 2018 L. Bruttel
 
Subjects
Behavioral Economics,  Experimental Economics,  Industrial Organization: Monopolies and Antitrust
 
Keywords
JEL Codes: C91D43L11
Buyer PowerMarket EntryExperiment
 

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In this article:
1. Introduction
2. Related Literature
3. Design and Procedures
4. Hypotheses
5. Results
6. Discussion and Conclusion
A. Parameters and Payoff Functions
B. Translation of the Instructions
References

Abstract

This paper studies the behavior of buyers confronting an incumbent monopolist and a potential market entrant in a repeated trade situation. In the experiment, buyers have two possibilities to demand lower prices in future trade periods. First, they can withhold demand. Second, they can voluntarily pay a higher price to the entrant in order to encourage future re-entry. Both these forms of buyer behavior occur in the experiment. They are less frequent when the number of buyers is large as opposed to small. A control treatment tests to what extent such behavior can be attributed to strategic motives.

DOI:10.1561/105.00000082