One-stop shopping behavior, buyer power, and upstream merger incentives

We analyze how consumer preferences for one-stop shopping a¤ect the (Nash) bargaining relationships between a retailer and its suppliers. One-stop shopping preferences create demand complementarities among otherwise independent products which lead to two opposing effects on upstream merger incentives: rst a standard double mark-up problem and second a bargaining e¤ect. The former creates merger incentives while the later induces suppliers to bargain separately. When buyer power becomes large enough, then suppliers stay separated which raises nal good prices. We also show that our result can be obtained when wholesale prices are determined in a non-cooperative game, under two-part tari¤s and when products are substitutable.