The Formation And Effect Of Retailer's Countervailing Power:the Role Of Consumer Preference

The theory of countervailing power is one of the most important problems in the research of industrial organization theory in recent years.According to the basic logic of vertical relationship theory and economic theory,we consider the consumer purchase decision into the research framework,try to excavate the foundation causes of countervailing power,then attempt to carry out a systematic generate path of countervailing power under the background of consumer preferences in the case of consumer preference on brand reputation,environment preference and convenience.Many studies tried to reveal the source and effect of countervailing power,at the same time,the regulatory authorities also make some explorations and try to provide some basis for regulations.However,most of these studies focus on the characteristics of upstream and downstream firms,ignoring the role of consumer preference on countervailing power.In fact,as one of the central controller in the market,consumer preference plays a significant role in the allocation of social resources.Then,we discuss in detail for the influence of different types of preference on the formation of the countervailing power and its effects.The results of the paper make up for shortcomings of the countervailing power theory and the theory of vertical relationship,improve the new industrial organization theory and research results of the countervailing power theory,but also provide theoretical basis for firms' strategy development and industrial regulation policies.In practice,the difference of consumer groups' preferences will have an impact on the horizontal position of the downstream retailers,thus affecting the retailer's vertical bargaining position and the countervailing power.On this phenomenon,some scholars study the relationship between consumer behavior and countervailing power,and try to explain the effect of scale on the process of the countervailing power formation in theory,but the role of consumer preferences on countervailing power function has not been carried out.Based on this,this study will introduce the different types of consumer preferences into the research framework,and build the formation theory of countervailing power,under the background of brand reputation,consumption environment and convenience buyer.And then,we try to reveal the reason of countervailing power from the level of the market environment,this is also the core research content.The thesis is divided into eight parts,namely,the introduction,the literature review,the theoretical framework,the formation of countervailing power in the case of consumer preference on brand reputation,consumption environment and convenience,numerical simulation and extended analysis,and the last part is conclusions.Specifically,this thesis completes the research work in the following aspects:(1)Based on the extensive literatures about the traditional economic theory and industrial organization theory,we summarize and evaluate concept of consumer preference and countervailing power,the impact of consumer preference and countervailing power,and then summarize the direction and goals based on the significance of this thesis.(2)The paper constructs a theoretical framework to analyze the effect of consumer preferences on countervailing power.According to the situation of different buying experience,we classify and summarize different types of consumer preferences'characteristics,namely brand reputation,consumption environment and convenience.Furthmore,we explain the framework and the core content of this paper,combined with the description and discussion of the research methods.(3)Based on the direction and goals,we study the trading conditions and transactions between the supplier and retailers to reveal the formation mechanism of countervailing power,in the case of brand reputation,environment and convenient consumer preference in M-O market structures.We also study the firms' optimal strategies and market equilibrium conditions.The results show that the consumer preferences on brand reputation can make the dominant retailer possesses countervailing power.The retailer's countervailing power increases with the consumer preferences on brand reputation.Similarly,the dominant retailers' countervailing is also enhanced when consumer preferences on consumption environment and convenience is increased.In addition,countervailing power under all types of consumer preferences can improve the consumer's utility as well as the social welfare.This study enriches the existing literature about the formation of the countervailing power and provides some theoretical reference for the firms and regulatory agencies.(4)We make some numerical simulation further to verify the conclusions get from theoretical model,compare the equilibrium results under different competition modes.We also study the economic effects of consumer preference and the relationship between the consumer preference and countervailing power.