Dominant Retailers and the Countervailing-Power Hypothesis

Posted: 2 Dec 2003

See all articles by Zhiqi Chen

Zhiqi Chen

Carleton University - Department of Economics

Abstract

I assess rigorously the countervailing-power hypothesis using a model that captures the main ingredients of Galbraith's (1952) arguments as well as some of the important features of the retail industry. I demonstrate that an increase in the amount of countervailing power possessed by a dominant retailer can indeed lead to a fall in retail prices for consumers. However, total surplus does not always increase with the rise of countervailing power because of the possible efficiency loss in retailing. Furthermore, the presence of fringe competition is crucial for countervailing power to benefit consumers.

Suggested Citation

Chen, Zhiqi, Dominant Retailers and the Countervailing-Power Hypothesis. Available at SSRN: https://ssrn.com/abstract=463782

Zhiqi Chen (Contact Author)

Carleton University - Department of Economics ( email )

1125 Colonel By Drive
Ottawa, Ontario K1S 5B6
Canada

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