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Direct Sales and Bargaining
Journal article   Open access   Peer reviewed

Direct Sales and Bargaining

Javier D. Donna, Pedro Pereira, Yun Pu, Andre Trindade and Renan C Yoshida
RAND Journal of Economics, Vol.55(4), pp.749-787
Winter 2024
DOI: https://doi.org/10.1111/1756-2171.12480

Abstract

Direct-to-consumer sales bargaining vertical mergers double marginalization Advertising
Cutting out the intermediary and selling directly to consumers is an increasingly common strategy by manufacturers. We develop a structural model of vertical relations where manufacturers bargain with retailers and sell their products directly to consumers. Direct sales generate potential consumer gains due to additional competition and product variety but also increase manufacturers’ bargaining leverage, thereby increasing upstream and downstream prices and potentially reducing consumer welfare. We estimate the model using data from the outdoor advertising industry to quantify the bargaining-leverage and welfare effects of direct sales. We discuss the relevance of the bargaining-leverage effect for vertical merger evaluation.
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Domestic collaboration
International collaboration
Citation topics
6 Social Sciences
6.122 Economic Theory
6.122.503 Antitrust
Web Of Science research areas
Economics
ESI research areas
Economics & Business

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