Research On The Welfare Effect Of Buyer Power To Related Parties

At present, the key point of China’s economic development is to adjust the economic structure. With the reform of the supply-front, in order to optimize market structure and industry, it is also necessary to work hard from demand side. The continuous change of retailing industry has direct influence on total demands of social consumer goods. Because of retailers’ emerge, the professional division is clear-cut, each one being charged with specific responsibilities, where retailers for sale and producers for manufacture. In recent years, there has been significant consolidation and concentration among retailers. The buyer power, arising from increased concentration, will significantly influence the benefits of relative parties in retail chains.Considering the present situation of our country’s economy, this paper builds a basic economic model to analysis the positive implications of retailers’ buyer power from the social welfare viewpoint., and then to test the effects of another factor——market concentration with buyer power. To avoid the losses of interests,two parties will take appropriate strategies. Therefore, the paper builds Stackelberg model to analysis the different effects of collaboration between retailer and producer. The results indicate that, the existence of retailers’ buyer power is good for the social welfare increase, but higher power will decrease the welfare of competitor; while the collaboration will further increase social welfare. Furthermore, although the increasing concentration of retailing market will improve the competition efficiency, it will harm the consumers by pushing up the retailing price.The research is conducted both theoretically and through data and case study work. Apart from theoretical analysis, this paper also empirically studies the retail status in our country, and estimates the social losses caused by the power of large supermarkets. Then the paper takes Wal-Mart as an example, to explain that buyer power will have a positive impact on social welfare by promoting the collaboration between large retailers and producers. At last, it is clear that retailing is big business, so the government should control the size of buyer power, properly decrease the concentration of retailing market, and creative market channels. As a result, we can ensure that even the smaller retailers can compete on an effective basis, and then achieve the better development of retail industry.