Journal of Northeastern University Natural Science ›› 2019, Vol. 40 ›› Issue (7): 1051-1055.DOI: 10.12068/j.issn.1005-3026.2019.07.025

• Management Science • Previous Articles     Next Articles

Effect of Buyer Power on the Cost-Price Pass-Through

ZHAO Qiu, LI Kai, TANG Chen-xi   

  1. School of Business Administration, Northeastern University, Shenyang 110169, China.
  • Received:2018-06-14 Revised:2018-06-14 Online:2019-07-15 Published:2019-07-16
  • Contact: ZHAO Qiu
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Abstract: The influencing factors of cost-price pass-through in the vertical industry chain were studied. The cost-price pass-through was decomposed into the wholesale pass-through and retail pass-through, and the effect of buyer power on the two kinds of pass-through was analyzed under three vertical contracts: linear pricing, two-part tariffs, and revenue-sharing. The results showed that both buyer power and vertical contract will affect the pass-through. Under linear contract, buyer power has no influence on the retail pass-through, but has an impact on the wholesale pass-through, and the influence is related to the demand curvature. Under the two-part tariff system, the wholesale pass-through and retail pass-through have nothing to do with buyer power. Under revenue-sharing contract, the retail pass-through decreases in buyer power, and the wholesale pass-through increases in buyer power.

Key words: cost-price pass-through, vertical contract, buyer power, industry chain, wholesale level, retail level

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