Journal of Northeastern University Natural Science ›› 2019, Vol. 40 ›› Issue (8): 1197-1204.DOI: 10.12068/j.issn.1005-3026.2019.08.024

• Management Science • Previous Articles     Next Articles

Impact of Buyers’ Market Power on Innovation Incentives of Product Quality in Downstream Enterprises

GUO Xiao-ling1, LI Kai1, NONG Bei2   

  1. 1. School of Business Administration, Northeastern University, Shenyang 110169, China; 2. Product Operations Department, China UnionPay, Shanghai 200080, China.
  • Received:2018-06-26 Revised:2018-06-26 Online:2019-08-15 Published:2019-09-04
  • Contact: GUO Xiao-ling
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Abstract: A vertical product quality differentiation model consisting of monopolistic manufacturers and downstream oligarchic competitors was constructed. Based on this model, the changes in quality-innovating incentives and market equilibrium results were investigated before and after the downstream large-scale enterprises with high-quality products had market power. Research showed that when downstream enterprises at different quality levels all have no market power, the quality promotion of any party will stimulate the innovation enthusiasm of its competitors. When a downstream large-scale enterprise has market power and negotiates with an upstream manufacturer, the wholesale prices and the retail prices of the two downstream enterprises will decline with the increase of market power. At the same time, the wholesale prices, retail prices and market sales of the two downstream companies all depend on buyers’ market power while the sales and profitability of small-scale enterprises remain unchanged.

Key words: buyers’ market power, Bertrand competition, quality innovation, innovation incentive, cooperation negotiation

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