Supplier Power Trumps Mergers, Keeping Consumer Prices High
In some markets, powerful suppliers can control prices by setting terms for retailers that carry their products. The study examines how this supplier strength can balance out the effects of business mergers on what consumers pay. When suppliers have more influence, they can create contracts that lessen the impact of mergers on prices, which benefits all parties involved. After a merger, the supplier may lower the price it charges for goods sold to the merged companies to maintain overall industry profits. By adjusting a common pricing model, the researchers were able to show how supplier actions in response to mergers can affect consumer prices.