Leveraging buyer power

This paper analyzes the different channels through which the exercise of buyer power can both trigger and accelerate further concentration in the downstream (or retail) industry. We show how the existence of size-related discounts creates higher incentives for those buyers that are already large to grow even further, either through acquisitions or through investing in a more competitive offering. In addition, larger buyers gain additional market share as their rivals' purchasing terms deteriorate. We also investigate how, even though no firm exits the market, the growing concentration of the retail market can harm consumers. (C) 2007 Published by Elsevier B.V.