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A1165
Title: Reexamination of bargaining power in the distribution channel under possible price pass-through behaviors of retailers Authors:  Tomoki Matsumoto - Nara Institute of Science and Technology (Japan) [presenting]
Tomohito Kamai - RAPPORT (Japan)
Yuichiro Kanazawa - International Christian University (Japan)
Abstract: The purpose is to investigate the determinants of relative power within a distribution channel by incorporating the price pass-through behaviour of a retailer into a Nash bargaining with a manufacturer and under the assumption of retail price observability for manufacturers. First, the retail margins are derived from a retailer maximizing its profit, assuming that the retailer anticipates the manufacturer's profit-maximizing response to the price pass-through behaviour. The manufacturer margins are then derived based on the generalized Nash bargaining with the retailer, where the parties negotiate the wholesale price. Finally, conditions are identified under which the bargaining power parameter is well-defined based on the values of retailer and manufacturer margins and the parameter describing the degree of price pass-through. A toy Bayesian estimation example using daily scanner panel data for canned tuna at a single retail chain in western Tokyo, Japan, demonstrates not only the applicability of the model but also a starkly contrasting result obtained without the price pass-through behaviour and the retail price observability for manufacturers.