Paul W. Dobson

BUYER POWER AND ITS IMPACT ON COMPETITION IN THE FOOD RETAIL DISTRIBUTION SECTOR OF THE EUROPEAN UNION

In recent years, there has been significant consolidation and concentration in food retail distribution in the European Union, as our paper documents. We examine the implications of this from the social welfare viewpoint. Our focus is on buyer power, since a commonly held view is that, arising from increased concentration, it may be a buffer to significant manufacturer power. We investigate the issue both theoretically and through data and case study work. We suggest the market will develop into a concentrated pattern across Europe, but that the eventual impact on consumers will depend significantly on the nature and form of competition between large retail chains and how well buying groups ensure that even the smaller retailers can compete on an effective basis.

Multifirm unions and the incentive to adopt pattern bargaining in oligopoly

Abstract This paper develops a model of wage bargaining between an industry-wide trade union and firms in an oligopoly and considers the circumstances under which the union prefers pattern bargaining, that is negotiating contracts in a sequential manner, to simultaneous bargaining with the firms. The paper goes on to consider the importance of the bargaining order in pattern bargaining when the firms are asymmetric. The analysis shows that the union gains by first targeting a firm which is in a relatively weak bargaining position (i.e. impatient to settle) or a firm with relatively large profits.

For a Few Cents More: Why Supersize Unhealthy Food?

Health-care experts believe that increases in portion sizes served by food vendors contribute to the obesity epidemic. This paper shows that food vendors can profit handsomely by using supersizing strategies where regular portion sizes are priced sufficiently high to discourage price-conscious consumers from selecting them, and the prices for enlarging food portions are set so low that these customers are tempted to order the larger portion sizes and overeat. Setting aside the impact of obesity on health-care costs, we show that using supersizing to steer customers toward consuming excessive amounts of food can destroy value from a social perspective; thus this social value destruction trap adds another justification for pressuring food vendors to reduce supersizing for unhealthy food. As a public policy response, we consider how “moderating policies” may counter these effects through measures designed specifically to encourage eating in moderation by applying supersizing bans, taxes, and warnings.

The impact of private labels on the competitiveness of the European food supply chain

The report studies the impact of private labels on the competitiveness of the European food processing industry and investigates whether a system of producer indication may improve the functioning of the food supply chain. The impact is studied using economic theory and empirical and legal analysis. The study is completed with an impact assessment.

Union–Firm Interaction and the Right to Manage

In the context of price-setting oligopoly, this paper shows that there may be consensus in union-employer bargaining for limiting the scope of bargaining to determining wage levels and allowing the employer to act unilaterally when competing in the product market. A strategic commitment by each union-firm pair to a right-to-manage framework, rather than a participatory approach, may benefit the bargaining parties since this entails higher negotiated wage rates which, by dampening competition in the product market, may allow for an increase in the amount of surplus generated by the parties. Copyright 1997 by Blackwell Publishing Ltd and the Board of Trustees of the Bulletin of Economic Research

The Competition Effects of Lookalike Private Label Products

This paper considers the competition effects of lookalike products, which seek to mimic the packaging, design and appearance of leading brands. Such products, most notable in the fast-moving-consumer-goods (FMCG) sector, are particularly associated with items promoted by retail organizations as part of their private-label programmes. The market power and control over the supply chain which the major retailers now enjoy means that by developing lookalike products they may have the opportunity to exploit unfairly and anti-competitively the image and goodwill that brand manufacturers have developed through careful and continual product and marketing investment. This, in turn, could distort the way and the extent to which manufacturers compete, enhance retailer control over the supply chain. In the process, this could undermine manufacturer branded goods which smaller retailers traditionally rely on, thus weakening their competitive position and resulting in further concentration of retail markets and less choice of store types and product varieties for consumers. The continuing absence of a rapid and effective legal remedy to prevent the rewards from brand investment being misappropriated by imitators means that such action will likely continue, with the upshot that manufacturer and retailer competition may be distorted to the detriment of consumer welfare and the public interest.

On the possibility of price wars when firms use a 'Tit-for-tat' strategy

Abstract The purpose of this paper is to illustrate how price wars can periodically occur in an industry even when all the firms behave cooperatively, and each firm has no intention of ‘cheating’ by attempting to undercut the other firms.

Buyer-Supplier Bargaining and Intra-Industry Competition

This chapter considers the trading processes between a monopoly supplier and a downstream oligopolistic industry and examines how the degree of downstream rivalry affects both the size and the distribution of profits in the market. With the downstream oligopolists setting the output level and bargaining only over the transfer price, total market profits are primarily determined by the degree of coordination in the final market. If the oligopolists behave in a perfectly competitive manner, then all the available profits are competed away. However, it is shown that strong collusion in the final market can also (perversely) harm the oligopolists, as well as the supplier, by restricting output below the optimal vertical integration level. With price-and-quantity (efficient) bargaining this problem does not arise and the shares of the joint profit-maximizing surplus are distributed simply according to the degree of cooperation between the buyers in bargaining with the supplier.

Healthy Competition to Support Healthy Eating? An Investigation of Fruit and Vegetable Pricing in UK Supermarkets

Governments and public health officials are urging the public to eat more fruits and vegetables to contribute to a healthy diet. However, there is concern that a lack of effective competition amongst supermarket retailers has resulted in inflated prices for these products which are deterring consumers from eating more of these healthy foods. We investigate this by examining the nature and extent of price competition for fresh fruits and vegetables amongst UK supermarket retailers, drawing on a panel of weekly retail and corresponding wholesale market prices over a seven-year period. We find that the extent of supermarket competition varies across the products, being quite intense on some but much weaker on others, where the retailers do not fully respond to each others prices and where the extent of their competitive interaction varies significantly with each other.